Key facts
- Treasury identifies AI as a credible accelerator of global productivity growth.
- AI could boost Australian productivity growth to 1.5-2% per year over the next decade.
- Current productivity growth forecasts remain at 1.2% annually, with uneven AI impacts expected.
- Realizing AI benefits requires firms to have skilled staff, reliable data, and affordable electricity.
- Governments must address legal frameworks, competition, infrastructure, and business growth.
- AI-related data center investment could reach $150 billion by 2030.
Australia's Treasury has identified artificial intelligence as the first credible accelerator of global productivity growth in nearly two decades, presenting Treasurer Jim Chalmers with a potential economic dividend for the upcoming Intergenerational Report. A policy paper suggests AI could boost Australian productivity growth to between 1.5 and 2 percent annually over the next decade, a significant increase from the current expectation of 1.2 percent. However, the Treasury cautions that these impacts will be uneven and require more than just access to AI models.
To capture the benefits of AI, firms need not only access to AI tools but also skilled staff, reliable data, affordable electricity, and the capacity to reorganize their operations. The paper emphasizes that AI diffusion is the central economic issue. Chalmers stated that AI is shaping up to be the biggest economic transformation of our lifetime and that the government cannot passively hope for benefits to materialize.
Federal and state governments are tasked with determining how existing laws apply to AI systems and addressing long-standing barriers to competition, infrastructure, and business growth. Productivity Commissioner Stephen King highlighted the need for a "legal gap analysis" to ensure laws are fit-for-purpose for AI and warned of risks like algorithmic collusion. He also noted that Australia's data and privacy laws lag global best practices.
The report indicates that about two-thirds of Australian businesses use AI in some form, but fewer than one-in-10 describe their adoption as significant, raising concerns about a potential two-speed economy where larger firms move faster. Geopolitical tensions could also restrict access to necessary capital, technology, or data. Unlike traditional technology shocks, AI's impact may be concentrated in localized services sectors, which account for about half of Australia's value-added.
Data centers are identified as a key infrastructure and energy challenge, with AI-related investment potentially reaching $150 billion by 2030. While Australia has a growing number of data centers, it lags behind the U.S. in density. A significant portion of data center supplies are imported, meaning immediate economic benefits might flow overseas. Data centers are also expected to significantly increase electricity demand. The Treasury's productivity equation faces the challenge that financial risks and energy crunches could materialize before AI's productivity gains are fully realized. Labor market disruption is also a concern, with the distribution of gains depending on access to training and adaptation capacity.