Key facts
- Reserve Bank of Australia Governor Michele Bullock stated that AI could be a bubble and has not yet demonstrated a positive impact on Australia's economic efficiency.
- Bullock noted that rapid AI adoption and investment in data centers are currently contributing to inflation.
- The RBA governor also indicated that inflation risks are materializing due to high energy prices and excess domestic demand.
- The Australian government's intergenerational report projects significant economic growth by 2066, largely based on the assumption of a substantial AI-driven productivity boost.
- Bullock commented that the housing market downturn is deeper than in recent history, with home loan approvals significantly down, particularly for investors.
- Traders are betting on a greater than 90% chance of the RBA raising interest rates from 4.35% to 4.6% at its next meeting.
SYDNEY — Reserve Bank of Australia Governor Michele Bullock expressed skepticism about the immediate economic benefits of artificial intelligence, suggesting it could be a bubble and has not yet demonstrably improved Australia's productivity. Her comments came as the government relies on AI to project significant future economic growth.
Speaking at a CEDA event in Sydney, Bullock noted that while AI is seen as a potential driver of economic efficiency, rapid adoption and investment in data centers are currently adding to inflationary pressures. She cited research indicating that productivity can initially decline as businesses adapt to new technology before potentially taking off once business processes are reimagined.
The Australian government's intergenerational report, released Tuesday, assumes a profound boost from AI, projecting inflation-adjusted per-person economic activity to rise from $99,200 today to $157,300 by 2066, based on productivity returning to its long-run level of 1.2% annual growth. Treasurer Jim Chalmers described AI as "the most transformative thing that will happen in our lifetime."
Bullock also highlighted that inflation risks are materializing due to sustained high energy prices and excess domestic demand. She noted that immigration is largely responsible for Australia's economic growth, but the housing market struggles to respond, contributing to affordability issues. House prices have fallen 3.1% over the past three months following RBA rate hikes and tax reforms, with home loan approvals dropping significantly, especially for investors.
Traders are anticipating a greater than 90% probability that the RBA will raise its cash rate from 4.35% to 4.6% at its upcoming meeting next week.