Lessons for our financial policies
Fifty years of Norwegian petroleum policy: Lessons for our financial policies Jon Gunnar Pedersen April 2015 Finansdepartementet Lesson # 1: It looks easier in retrospect Demand from oil and gas activity. Per cent of mainland Norway GDP Use of oil revenues and expected petroleum fund return. Pct. of trend-GDP for mainland Norway 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 1970 1980 1990 2000 2010 2020 2030 -4 2040 Sources: Statistics Norway & Ministry of Finance. 2 Finansdepartementet Lesson # 2: Get by with a little help from friends Terms of trade 1900-2013, Index 1990 = 100 280 280 230 230 180 180 130 130 80 1900 3 1915 1930 1945 1960 1975 1990 2005 80 2013 Finansdepartementet Lesson # 3: Max Weber rules, OK Per cent of trend GDP for mainland Norway 25 Net oil revenues 20 15 25 20 15 4% return on fund 10 10 5 5 0 0 Structural budget deficit -5 -5 1970 4 1985 2000 2015 2030 2045 2060 Finansdepartementet Lesson # 4: Stability and consensus helps Foreign policy consensus EEA agreement Oil sector consensus Pension reform consensus Tax system consensus Financial sector consensus 5 Finansdepartementet Lesson # 5: Trust us; we’re the government Confidence in national authorities in OECD countries Source: Ministry of Finance 6 Finansdepartementet Lesson # 6: Never forget the labor market Wage costs per hour, industrial sector, 2013 Index. EU17 trading partners = 100. Common currency. 180 160 140 Wage level 2013 and exch. ratios 2 Dec 2014¹ Wage level and exch. ratios 2013 120 100 80 60 40 20 0 Source: Det tekniske beregningsutvalget for inntektsoppgjørene 7 Finansdepartementet Lesson # 7: Growth can be good for all 2012. Source: Eurostat 8 Finansdepartementet Lesson # 8: It’s all in the mind 4% National wealth per capita 4% 11 % Future economic rent from petroleum NPV of labor force production Real assets Financial assets 81 % Source: Statistics Norway and Ministry of Finance (PM13) 9 Finansdepartementet Lesson # 9: Productivity sclerosis Gross product per hour, Index 1990 = 100 270 270 Construction Bygg og anlegg Industri Industry 240 240 Privat tjensteyting bank og forsikring) Private services(utenom (excl. finance) Bedrifter Fastlands-Norge Companies in mainland Norway 210 210 Offentlig forvaltning Central and local government administration Varehandel Retail trade 180 180 150 150 120 120 90 90 1990 1995 2000 2005 2010 2013 Source: Statistics Norway 10 Finansdepartementet Lesson # 10: Money isn’t always good for you Cost estimate, NOK million First estimate Final cost Rv. Ryfast 650 5 490 Rv. 13 Hardangerbroen 800 2 570 E18 Bjørvika project Rv. 706 Northern bypass Double railtracks Ski-Sandbukta 1 200 7 100 450 1 600 300 1 708 Double railtracks Sandvika-Asker St. Olav’s Hospital 1 400 3 714 1 000 12 700 Skjold missile torpedo vessels Navy frigates (5) 1 500 5 000 6 000 24 700 90 1 9271 750 4 356 40 1 820 Stad ship tunnell National Opera New Holmenkollen 1 Last estimate Source: Concept project, NTNU 11 Finansdepartementet Lesson # 11: The danger of the non-wannabe Percentage of students completing secondary education as scheduled 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Source: OECD. 12 Finansdepartementet Finland Sverige Danmark Malta Estland Norge Storbritannia Kypros Korea Irland Nederland Latvia Tsjekkia Frankrike Gjennomsnitt Luxembourg Slovakia Østerrike Kroatia Tyskland Belgia Litauen Portugal Slovenia Romania Ungarn Montenegro Hellas Spania Italia Bulgaria Albania Makedonia Tyrkia Polen Lesson # 12: Death makes all the difference Percentage of employees who have reported substantial restructuring or reorganisation within the last three years (2011) 60 50 40 30 20 10 0 Source: OECD. 13 Finansdepartementet Lesson # 13: Odd, and staying that way The Kingdom doesn’t do deficits Everyone should pay their taxes Flexicurity Save it, but stash it abroad Keeping the Krone Living well with the EU Simple, transparent and small 14 Finansdepartementet
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