The Reserve Bank says AI could supercharge your workplace. Right now, it’s inflating cost of living
By Google News Category Budgeting ·
The AI building boom that is powering the global economy could force interest rates to remain higher, the Reserve Bank’s chief economist has warned, while revealing there are few signs the new technology will eat into the job prospects of young Australians.
Sarah Hunter, in an address to a business conference in Sydney on Monday, said AI was already having a major impact on the Australian economy with investment in data centres up 10-fold over the past three years with signs they are competing against the construction sector for trade workers.
And data centre construction alone could be the equivalent of 2 per cent of GDP for the next two years, but their demand on the energy grid could force up power prices.
The size of the AI boom has caught the Reserve and other central banks by surprise. Last week, the RBA forecast that business investment would climb by 12 per cent this year. In May, it had forecast growth of just 0.8 per cent.
Proponents describe AI as a transformative general purpose technology, similar to the advent of railways and electricity. These technologies upended economies, work practices and the broader world.
Hunter said AI could lift productivity and transform workplaces while increasing household and business spending.
She likened the current boom to the rollout of the internet in the late 1990s and early 2000s, saying this was a period of robust economic growth and higher interest rates around the world.
“There is tentative evidence of this happening with AI; our estimates for the neutral rate have risen in recent years, and bond yields have increased over the past couple of months with market participants citing strong demand for capital as a key driver,” she said.
“Firms want to invest to take advantage of the new technology and to expand their capacity to meet faster future growth. Given this is happening globally, they’ll be competing for scarce savings, pushing up interest rates.”
The federal government is under pressure to come up with policies to boost Australia’s productivity which, like most nations, has flatlined for the past decade.
Hunter said there was limited evidence yet of an AI-led lift in productivity, noting this was likely due to businesses taking time to invest and reorganise their operations to take full benefit of the technology. But this could rapidly change.
“This experience mirrors that of previous general-purpose technologies. Their implementation typically led to what economists call a productivity J-curve,” she said.
“One example is electricity. The largest productivity gains did not come simply from replacing steam engines with electric motors, but from reorganising production and redesigning factory processes to best suit this new source of energy.”
An ongoing concern is that AI will wipe out occupations, forcing many people out of work.
Hunter said there was little evidence the technology had affected overall employment, but added there were signs of lower hiring among younger workers in “highly AI-exposed occupations”.
“In Australia, contacts in the RBA’s liaison program indicate that AI has not yet impacted most firms’ headcount and is not expected to over the next year,” she said.
The impact of AI on the Australian economy has prompted the Reserve to devote more of its resources on its economic ramifications. On Monday, the bank released four separate pieces of new research into AI.
One research paper suggests 5.3 per cent of Australian households’ financial…
Originally published by Google News Category Budgeting
