RBA's Sarah Hunter says AI has yet to boost productivity or trigger widespread job losses

RBA Questions AI's Productivity Promise

Reserve Bank of Australia Assistant Governor Sarah Hunter delivered a sobering assessment of artificial intelligence at the UBS Australasia Conference on Monday, stating there is limited evidence the technology has meaningfully lifted productivity or triggered widespread job losses1

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. The chief economist's remarks come as central banks worldwide grapple with understanding AI's economic effects amid massive investment in the technology.

Short-Term Inflationary Pressures from AI Investment

Sarah Hunter explained that artificial intelligence is currently adding to inflationary pressures at a time when the economy faces supply constraints. The AI productivity boost remains elusive, while demand surges ahead. A boom in data center investment has contributed to demand pressures in the Australian economy, becoming one factor behind the RBA's five interest rate hikes this year, pushing rates to an 18-year high of 4.85%1

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. The Reserve Bank of Australia has increased its data center investment expectations 10-fold in just three years as it undertakes research to estimate AI's impact2

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Hunter noted that over time, supply will catch up with demand as data centre capacity and related sectors expand, easing current bottlenecks. If AI delivers broader productivity gains, economies will be able to produce more with the same inputs, causing initial inflationary pressures from AI investment to dissipate1

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Early Signs of Labor Market Disruption

While AI and job losses have not materialized on a large scale, Hunter identified tentative signs of adjustment in the labor market. There are weaker job ad postings and employment outcomes in more AI-exposed occupations, with stronger growth in areas where the technology has had less impact, particularly for younger workers1

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. The RBA expects artificial intelligence to cause significant changes in employment patterns even as its long-term inflation impact remains broadly neutral2

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Financial Stability Risks Loom Large

The RBA chief economist warned that AI could increase financial stability risks if the technology fails to meet sky-high expectations. Asset prices remain exposed to sharp repricing or even disorderly adjustments if AI investment returns fall short of what markets anticipate1

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. This concern reflects growing scrutiny from central bankers about whether massive capital flows into AI infrastructure will generate commensurate economic returns, or whether a correction looms as reality fails to match hype.