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AI could be a bubble and is not yet making Australia more productive, Michele Bullock says
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Reserve Bank of Australia Governor Michele Bullock has expressed caution about the economic impact of artificial intelligence, suggesting it could be a bubble and noting there is no evidence it is boosting national productivity. Her comments come as the Albanese government promotes AI as a solution to economic challenges, with Treasurer Jim Chalmers calling it 'the most transformative thing that will happen in our lifetime.'
Bullock highlighted a research finding from the RBA's South Korean counterpart, which showed employees using AI tended to produce the same output but worked 1.5 hours less per week. This suggests that while adoption is rapid, the immediate effect may be a decline in productivity as workers adapt to the new technology. She noted that the RBA and global peers view AI as 'the great white hope' for productivity but have yet to see tangible benefits.
The potential for a slump in tech values is a concern for central banks, as it could negatively affect economic activity. Bullock stated that a messy downturn in tech shares is a risk being closely monitored. This comes amid broader market volatility, although US tech stocks recently surged following Meta's debut of its new Muse AI agent.
Australia's government is relying heavily on AI in its long-term economic projections. The recent intergenerational report assumes AI will deliver a 'profound' productivity boost, underpinning a forecast that per-person economic activity will rise from $99,200 to $157,300 by 2066. However, economists have questioned the underlying productivity growth assumption of 1.2% annually, which Bullock described as a target to aim for despite scepticism.
Bullock also addressed the housing market, stating the current slump in house prices is deeper than others in recent Australian history. She noted that new immigration, which was almost entirely responsible for recent economic growth, exacerbates housing pressure by increasing demand without immediately adding supply. Home loan approvals have slumped, particularly for investors, marking a significant shift in the market dynamics.
Looking ahead, the RBA is expected to raise interest rates next week, adding further pressure to the economy. Bullock's remarks underscore a growing tension between official optimism about AI's future potential and current economic realities, including inflation and a cooling housing market. The central bank's stance suggests a cautious wait-and-see approach to the technology's true economic value.
