RBA's Gloomy Outlook Sparks Productivity Growth Debate

The Reserve Bank of Australia's gloomy economic outlook has been called into question by economists who point out that its assumptions about productivity growth are overly pessimistic. The Intergenerational Report, which maps out the Australian economy over the next 40 years, assumes that productivity will grow at a rate of 1.2 per cent annually, which is higher than the RBA's estimate of 0.7 per cent.

The Treasury's assumption was criticized by HSBC chief economist Paul Bloxham, who questioned whether artificial intelligence could solve Australia's infrastructure and housing problems quickly enough to boost productivity.

However, Westpac's Luci Ellis, a former RBA chief economist, countered that the RBA's forecasts might be too gloomy. She noted that the RBA assumes a repeat of factors that have dragged down recent productivity outcomes, despite strong global investment and policy changes domestically.