The Bank of Norway predicts wage growth

The Bank of Norway predicts that salaries will continue to increase, along with a low interest rate. "This is not a surprising consequence of a very solid economic development, and a tight labor market," says Head of the Central Bank Øystein Olsen.

The result is that wages could continue to increase for the next few years, but at the same time probably put us ahead of our trade partners, he explains.

This year's central wage negotiations will lead to an increase of at least four percent, after a strike in the public sector and heavy discussions. Still, the Bank of Norway predicts an even further increase next year of 4,25 percent, before the rate settles at 4,40 percent in 2014 and 2015.

Most likely, this will reinforce the image we've seen over a long period of time - a weakened competition abroad, Olsen explains. As a result, certain businesses will be squeezed out of the market and will have to cut their staff, little by little," he says. "Resources will be allocated towards the public and service sector."

In spite of higher salaries, Olsen predicts that the price level will increase at a higher rate than wages the next few years. By 2015, he suspects a price growth of 2,5 percent, which means that the real wage increase will end up at 2 percent. Still, over the course of five years the total wage increase will be just under 14 percent.

As an extra bonus to wage earners, interest rates seem to remain low. Yesterday, the key interest rate was set at 1,5 percent. According to Olsen, the first increase will come sometime between December this year.

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