Treasurer Jim Chalmers says artificial intelligence is central to his aim to turn around Australia’s lagging productivity, which could ultimately help lower interest rates. Productivity and real wages growth have been generally stagnant in Australia for more than a decade, with business investment also generally weak, albeit with recent signs that capital expenditure is starting to pick up. Stagnating productivity means that, instead of making and selling more goods from each hour worked, businesses can generally only maintain or increase their profits by raising prices. This drives up inflation and has created a key sticking point for the Reserve Bank when it considers whether to raise or lower interest rates, as the central bank seeks to balance price stability with sustainable employment.
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OECD data shows that instead of productivity, corporate Australia is relying on high migration, consumer wealth from house values and favourable terms of international trade to maintain its profitability. In an interview with Alan Kohler, Chalmers spruiked the government’s new AI framework announced by Prime Minister Anthony Albanese and said artificial intelligence and productivity would be “front and centre” of the intergenerational report he would be releasing towards the end of the year. “If you look at all the big shifts in the global economy and in our societies — aging and demographics, changing industrial base, geopolitical fragmentation, the energy transformation, all of that is relevant to this technological revolution which we see in AI,” he said. The Treasurer’s comments reflect a growing recognition that Australia cannot rely on population growth alone to drive economic prosperity.
“For me, it’s central to the work that I do as Treasurer, and it’s central to the work that I do trying to turn around a couple of decades of ordinary productivity performance,” Chalmers said. “Everybody recognises at the most basic level that AI has the capacity to make our economy more dynamic and therefore more productive and the best way to grow our economy over time and lift living standards for people is to make it more productive.” Chalmers said Australia’s productivity decline had spanned two decades and the most recent federal budget included an estimated $10 billion cut in compliance costs forecast to lift GDP by $13 billion — the biggest boost to productivity in three decades. He emphasised that these measures are designed to create an environment where businesses can innovate and adopt new technologies without being weighed down by red tape.
