Highlights

  • Strong business credit growth and expanding investment activity are supporting Australia's economic resilience despite weaker household consumption.
  • Artificial intelligence and data centre development are contributing to corporate borrowing demand and capital expenditure.
  • RBA Assistant Governor Christopher Kent identifies business investment as an important potential driver of future productivity growth.
  • Weak productivity growth, elevated business costs and global uncertainties remain challenges for Australia's economic outlook.

AI Investment and Business Borrowing Provide Support to Australia's Economy

Australia's business sector is demonstrating resilience as rising corporate borrowing and investment in artificial intelligence-related infrastructure provide support to economic activity. While household spending and housing indicators are weakening, businesses continue to pursue investment opportunities, creating a contrasting picture of the domestic economy.

Speaking at the Commonwealth Bank's Global Markets Conference in Sydney on 19 October 2026, Reserve Bank of Australia (RBA) Assistant Governor (Financial Markets) Christopher Kent highlighted the strength of business credit and investment plans despite tighter monetary conditions.

The developments suggest that corporate investment remains an important source of economic activity as higher interest rates influence household spending decisions.

Data Centre Expansion Strengthens Corporate Credit Demand

Business credit growth has remained strong, partly supported by investment in data centres and broader corporate funding requirements.

Kent noted that business borrowing activity extends beyond technology infrastructure, indicating that credit demand is relatively broad-based.

Discussing financial conditions, he stated, "Business credit has been growing really strongly. Some of that's funding for data centres, but not all of it."

Businesses are also using internally generated funds alongside external financing to support investment activity.

This sustained credit demand contrasts with weakening housing credit growth and highlights differences in how businesses and households are responding to monetary tightening.

Artificial Intelligence Investment Influences Global Growth

Artificial intelligence investment is also contributing to broader global economic resilience.

Kent suggested that AI-related activity may have helped sustain global growth despite geopolitical disruptions, energy shocks and tighter financial conditions.

He observed, "if it was not for AI, maybe global growth would not have been nearly as strong as it has been."

However, stronger investment demand and expectations of future productivity gains may also contribute to upward pressure on neutral interest rates.

This creates additional complexity for central banks attempting to assess whether monetary policy is sufficiently restrictive.

Business Investment Offers Potential Productivity Benefits

Australia's weak productivity performance remains an important economic concern, particularly as businesses face elevated labour and operating costs.

Kent identified capital investment, including infrastructure development, as one potential contributor to stronger productivity growth over time.

Nevertheless, he cautioned that investment alone cannot guarantee productivity improvement.

The RBA continues to examine whether ongoing investment activity can eventually translate into greater productive capacity and improved economic efficiency.

Stronger productivity would be particularly important in an environment where supply constraints and business cost pressures continue to influence inflation.

Corporate Resilience Contrasts With Household Weakness

The difference between household and business conditions presents a complicated outlook for Australia's economy.

Higher interest rates are affecting consumer spending, housing investment and household borrowing. Meanwhile, business credit and investment intentions remain comparatively resilient.

Kent emphasised that the business sector has maintained strength despite broader concerns about slowing activity.

He noted that business investment plans are holding up strongly, alongside continued credit growth.

Looking ahead, sustained investment could support future productive capacity, although the ultimate benefits will depend on whether stronger capital spending translates into measurable productivity gains.