Speaking at the Australian Finance Industry Association conference on 16 September, Reserve Bank of Australia’s (RBA) assistant governor (economics) Sarah Hunter said AI has the hallmarks of technologies that take time to diffuse.
“The way we’re thinking about AI [and] the way economists are generally thinking about AI is what we call a ‘generalist technology’, which means it can be applied right across the economy into pretty much every sector, with some exceptions,” Hunter said.
“As a generalist technology, these things tend to take years and years to fully roll out [and] to be adopted. We learn how to use them then you really get the pay-offs from them.”
Hunter drew on the late economist Robert Solow’s famous observation from the 1980s and 1990s, when personal computers were spreading rapidly but their benefits took time to show up in productivity data.
“We’re not really seeing its impact in the data just yet but I’m not surprised by that. It’s clearly here, it’s clearly an incredibly powerful technology,” she said.
RBA governor Michele Bullock also addressed AI’s potential during the 60th Shann Memorial Lecture on 3 September, citing federal government analysis which suggested generative AI alone could add between $45 billion and $115 billion annually to the economy by 2030.
“But this transformation is not just about profits – it is part of a much larger societal shift,” Bullock said.
“Technological change has always reshaped the labour market, and AI is no exception. While many experts anticipate a net increase in jobs, it is likely to be more nuanced: some roles will be redefined, others might be displaced, and entirely new ones will be created.”
Bullock added that the RBA is studying how emerging technologies can support its work, however, the governor emphasised that the board will not be using AI technology “to formulate or set monetary policy or any other policy”.
“Instead, we are looking to leverage it to improve efficiency and amplify the impact of staff efforts in areas such as research and analysis.”
She said the bank is already applying machine learning and granular datasets to improve its research into inflation, labour market shifts and household vulnerabilities.
“Across the RBA, we are looking at ways to use digital innovation to strengthen our analytical capabilities, better inform policy decisions and build resilience.”
Hunter further highlighted that while automation can replace repetitive tasks, humans will remain central to decision making and innovation.
“I do think there will always be a role for humans with [decision making], and we’re also the ones who can cut the edge, who come up with genuinely new ideas, and who can push the envelope,” she said.
She added that adapting working practices will be key: “One of the things we’ve all got to do to fully take advantage of this technology is work out how to use it and how do we change and transform how we work to take full advantage of it.”
RBA ‘pretty close’ on inflation
During the fireside chat, Hunter said the bank is confident it is “pretty close” to restoring inflation to target while maintaining full employment.
“We’ve put through three cash rate cuts this year, and in context of the labour market and our mandate, we also think that we’re pretty close to full employment,” she said.
That is not to suggest the RBA has declared victory in its battle against inflation or its pursuit of full employment, with Hunter emphasising that the board is “always going to worry”.
“We don’t want high inflation, we know how challenging high inflation is for the community to deal with … If you’re on a very low income and you don’t have a buffer and suddenly the price of bread or the price of milk goes up, that’s a really hard thing to swallow.”
Hunter stated that while the board wants low inflation, it needs to ensure it doesn’t go “too far the other way”.
“We don’t want to see people out of work unnecessarily,” Hunter said. “We’re not targeting a number of people out of work; we want the economy to be just in balance … A bit of a ‘Goldilocks’ outcome, that’s what we’re aiming for.
“Things will knock us about and we’ll get shocks down the track, we don’t know exactly what’s coming, but we really want to get that balance right for everybody.”
According to the latest data available from the Australian Bureau of Statistics (ABS), a surge in electricity prices saw the monthly consumer price index (CPI) increase from 1.9 per cent to 2.8 per cent in August, overshooting expectations of around 2.3 per cent.
Meanwhile, Australia’s jobs market remains in good nick, with the unemployment rate falling slightly to 4.2 per cent in July, with the number of employed people rising by 25,000 and unemployed decreasing by 10,000.
