AI Fails to Deliver on Economic Promises in Short Term

Artificial intelligence (AI) has been touted as a potential solution to Australia's economic woes, but it may have unintended consequences in the short term. Despite its promise to boost productivity and reduce costs, AI is not yet living up to expectations.

The Reserve Bank of Australia points out that inflationary pressures are driven by an imbalance between supply and demand in the economy, which is exacerbated by global oil shocks and conflicts beyond our control.

Although nearly one-third of Australian big businesses have adopted AI since 2024-25, productivity growth remains stagnant. In some cases, AI has even made jobs harder, particularly in professions such as investment banking, accounting, and corporate development.

The rise of 'AI slop' - low-quality content produced using AI - is wasting time and reducing the quality of output. This can harm productivity and inflation in two ways: by reducing the amount of things we can produce and by lowering the quality of products.

RBA governor Michele Bullock notes that the additional demand for building data centres, which are energy-hungry, could keep inflation elevated before AI brings about productivity improvements.