Reserve Bank of Australia (RBA) Assistant Governor (Economic) Sarah Hunter outlined how artificial intelligence (AI) could affect inflation, interest rates and employment in a speech at the UBS Australasia Conference in Sydney. Investment is already lifting demand, while evidence of a material increase in aggregate productivity remains limited. This imbalance is likely to put upward pressure on inflation in the near term. Over time, productivity gains could expand supply, but stronger demand is expected to accompany that expansion, leaving AI’s longer term effect on inflation broadly neutral.
Australian data center investment has increased tenfold from a low base over the past three years. Much of the spending involves imported equipment, limiting its net contribution to gross domestic product, although construction, engineering and energy infrastructure are receiving modest indirect benefits. Globally, investment is adding to semiconductor supply constraints, with some costs passing through to a narrow range of consumer electronics. Productivity benefits may take longer to emerge because businesses need to reorganize processes and make complementary investments. Stronger global investment demand, potentially combined with lower savings, could also raise the neutral interest rate. Recent RBA estimates have risen, but the extent of any AI contribution remains difficult to quantify.
Labour market evidence likewise points to limited aggregate effects so far. Most Australian firms contacted through the RBA’s liaison program report no impact on headcount and expect none over the next year. Weaker hiring and employment outcomes in some occupations exposed to AI remain modest and cannot yet be confidently attributed to adoption. Jobs and Skills Australia estimates that 4% of workers are highly exposed to AI automation, compared with 31% whose work is highly exposed to augmentation. These figures measure potential effects on tasks, not actual adoption or eventual job losses.