RBA warns AI boom adds to short-term inflation as research papers land

The Reserve Bank of Australia has delivered a direct assessment of how artificial intelligence is shaping the national economy, cautioning that the current surge in technology investment is adding to inflationary pressures without yet delivering broad productivity gains.

Speaking at a UBS conference in Sydney on Monday, RBA Assistant Governor Sarah Hunter explained that heavy spending on local data centres and hardware acts as an immediate demand shock. Because the economy faces existing supply constraints, that extra activity puts upward pressure on prices. While the central bank expects the long-term impact on inflation to be broadly neutral once infrastructure expands and bottlenecks ease, the near-term effect has contributed to monetary policy staying tight.

Alongside the speech, the central bank published research papers examining the broader economic effects of the technology across household finances, computer infrastructure, import prices and the labour market.

Weak evidence of productivity and employment shifts

RBA researchers found limited evidence so far that generative software has lifted aggregate productivity across advanced economies. The study also found little proof of widespread job losses, though initial labour market patterns are emerging. Job advertisements and employment levels have softened in roles with high exposure to automated tools, while hiring has remained firmer in less-exposed occupations. This divide has been most visible among younger workers entering the job market.

The papers also looked at financial risk. Australian households now hold 5.3 per cent of their financial wealth in artificial intelligence shares, mostly through compulsory superannuation, up from 2 per cent at the end of 2022. RBA staff estimated that a 30 per cent decline in global tech valuations would reduce household wealth by 1.6 per cent, leaving household spending more vulnerable to sudden market swings.

Supply chains have also absorbed sharp price increases. RBA analysis showed that export prices for specialised memory chips produced in South Korea rose by more than 200 per cent over the year to September, driven by global data centre construction.

What this means for Australian businesses

For small and medium enterprise operators, the central bank's findings offer several practical considerations:

• Focus on concrete business returns rather than general experiments. The RBA's findings indicate that simply adopting software has not generated broad productivity gains. Measure each rollout against specific time saved or sales generated.
• Expect borrowing costs to reflect tech infrastructure demand. Heavy capital spending by cloud operators and multinational tech firms is keeping demand high across power and construction, which helps keep local interest rates elevated.
• Protect balance sheets against market adjustments. With household superannuation heavily exposed to overseas hardware and software vendors, a correction in tech valuations could cool domestic consumer sentiment and discretionary spending.
• Reassess junior role design. As routine desk duties change, entry-level staff need direct training on how to use software tools inside specific company processes, ensuring your business captures real efficiency.