As a budget traveller, i.e. staying in hostels, using public transport, self catering where possible, is Norway significantly more expensive than say Germany or France? If so what's the best way to minimize the cost?
It's a generally accepted fact that the Scandinavian countries are the most expensive places to travel. But personally, having travelled a lot within Europe and within Scandinavia, I don't think it's SO much more expensive in comparison to the rest of Europe.
Where prices differ is generally when it comes to alcohol (much more expensive), junk food/convenience food and eating out. If you're willing to buy your own food (and eat a lot of veg and not so much meat) and stay in the most basic hostels then the price difference is negligible. Public transport is in some places cheaper than in other parts of Europe.
But at the same time remember that you can expect to be paying 10kr ($1.8) for a can of coke. A beer can be anywhere upwards of 50kr, often as high as 80-90kr. The tap water is great though, so drinking should not be a problem.
If you're really careful you can probably get by on 6-700kr per day. Don't buy any fast food or junk food, this will really hit you in the wallet.
e: A slightly funny way of measuring relative expensiveness is the Big Mac Index: http://en.wikipedia.org/wiki/Big_Mac_Index
This is the Norwegian hostelling international website, membership is very much worth it in my experience: http://www.hihostels.no/no/ You can get accomodation for as cheap as 220/night even in summer if you're lucky.
For you as a Backpacker, Norway will be on pretty much the same level as for example Germany, France or Sweden, but slightly more expensive than eastern Europe. The Hostel rates should be about the same.
However some things are more expensive in Norway: Beer and Alcohol - i went out on a saturday with something equal to 20 Euro, and i got 2cl of whisky and some change for it... Tropical fruits like Bananas, Oranges and everything that wont grow in cold climate costs more, especially in all the small villages up north.
Domestic flights are also way more expensive (possibly because there is not much demand for it because few people live up there; and they only use small planes), and im not aware of any budget airline. Take the train or bus instead, unless you are in a hurry.
I've never been to Norway, but I lived with a norweigan guy in Ireland for a year. Ireland is/was more expensive that most the rest of europe. He said that coming from Norway was great cause Ireland was cheaper than home, an experience not many visitors can say!
I've heard anecdotially that Norway is more expensive that the rest of europe.
victoriah wrote in her answer:
I'm from Finland—another Nordic country generally considered expensive—and my understanding (anecdotal, from friends and colleagues who have visited or lived in Norway) is that Norway is significantly more expensive than Finland.
So the short answer is: Yes, Norway most certainly is significantly more expensive than European destinations in general. It resembles Switzerland in this regard.
On the other hand, if you have the possibility to work there, it's a great place to earn money. :-)
Some examples: A beer in a bar in Oslo can set you back as much as 10 € (~80kr). In Helsinki 4-6 € is normal and considered expensive by most foreigners. Price for a dorm bed in an Oslo hostel seems to range from 29 to 51 € (!), while in countries like Germany or France I've generally paid around 15-25 €.
In any case, I guess victoriah is right in that if you're careful you can keep your costs relatively low even in Norway. One obvious way to save heaps would be to pay nothing for accommodation, through CouchSurfing or a similar service, if that's your cup of tea. Norway has a high density of hospitable people opening their homes to strangers. One British CS guest of mine, for example, had great experiences in Norway and said it was much easier to find a host there compared e.g. to Baltics.
Update: Here are some actual statistics
(Which happen to support my anecdotal knowledge perfectly.)
A recent (2012) Eurostat study on prices of goods and services found that if EU zone average price level is described with 100, the most expensive countries in Europe are:
Looking at prices of alcoholic beverages & tobacco only, Norway is far and away above everyone else at 250 (followed by Iceland 155, UK 147, Sweden 145). Also for food & non-alcoholic beverages Norway is the most expensive: Norway 164, Switzerland 156, Denmark 136, Sweden 120. The same goes for restaurants & hotels: Norway 184, Swizerland 157, Denmark 154, Sweden 147. In other words, in things most relevant to a traveller, Norway is the most expensive country in Europe.
The cheapest European countries included in this study were Macedonia (45), Albania (51), Bulgaria (51), Serbia (57), and Bosnia and Herzegovina (57), with Bulgaria (51) and Romania (60) being the cheapest EU countries.
With Norway, it is easier to point out what is cheap rather than what is expensive.
In contrast to iHaveacomputer's answer, I find all kinds of fruit and vegetables cheap. That is because the fruit and vegetables are subsidized, and would otherwise cost a fortune.
First Price is a low cost brand that provides cheaper alternatives, sometimes equal in quality to its competitors. First Price products can be found at Kiwi or Meny (both grocery stores) and probably some other stores.
Landlord is a brand similar to First Price, but I only remember seeing their products at Rema 1000 (another grocery store).