AI Boom Raises Unemployment Fears Amid Productivity Hopes

RBA Governor Michele Bullock has warned that the rapid development of AI could lead to a 'difficult' period in Australia, characterized by higher unemployment. Speaking at a Committee for Economic Development of Australia fireside chat in Sydney on Tuesday, September 22nd, Bullock stated that AI may worsen the tradeoff between inflation and unemployment.

Bullock emphasized that while AI is seen as a 'great white hope' to improve productivity, its effects are still being felt primarily on the demand side of the economy. She noted that many people associate AI improvements in productivity with job losses, but also acknowledged it could be an opportunity for growth, allowing more goods and services to be produced.

In terms of unemployment, Bullock said between 4.5% and 5% would likely take enough heat out of the labor market to ease pressure on inflation. She also cautioned against policy decisions that might perpetuate ongoing inflation by minimizing indirect effects.