Treasury vs RBA: Productivity Growth Projections Under Fire

The Reserve Bank of Australia's (RBA) economic outlook has come under scrutiny after it was accused of being too pessimistic about productivity growth. The criticism comes from a recent Intergenerational Report, which contains projections for the Australian economy over the next four decades.

According to the report, Treasury assumes that productivity will grow at an average rate of 1.2% per year over the next 40 years. This is significantly higher than the RBA's assumption of 0.7% growth over the medium term.

HSBC chief economist Paul Bloxham criticized Treasury's estimate as 'unrealistically optimistic', citing the country's housing shortage, lack of affordable energy, and inadequate infrastructure as reasons why AI alone cannot solve these problems.