Key Highlights

• Assistant Governor Sarah Hunter's assessment is that AI is broadly neutral for Inflation over the long run.

• Inflation is well above target in the short term, with headline inflation at 3.9%.

• Data centre Investment in Australia has risen tenfold from a very low base over three years.

• AI-related share prices in the United States have roughly quadrupled since the end of 2022.

An RBA Assistant Governor has cautioned against expecting artificial intelligence to do the heavy lifting on inflation, arguing that history and current evidence point to slow, uneven effects.

As artificial intelligence spreads through workplaces, a tempting idea has taken hold in some commentary: that cheaper "intelligence" could cut costs so dramatically that it pushes inflation down on its own. Speaking at the UBS Australasia Conference in Sydney on 9 November 2026, Sarah Hunter, the Reserve Bank of Australia's Assistant Governor (Economic), offered a more cautious view.

"Consistent with previous general-purpose technologies, AI's long-run effect on inflation is likely to be broadly neutral," she said, in a speech titled "What Happens to the Economy as 'Intelligence' Gets Cheaper?".

That assessment matters because it arrives at a moment when inflation is well above where the RBA wants it.

Why "neutral" rather than "deflationary"

The phrase "general-purpose technologies" refers to innovations, such as electricity or computing, that eventually spread across almost every part of an economy. Ms Hunter's point was that such technologies have not historically delivered a lasting change in the rate of inflation, even when they transformed how goods and services were produced.

One way to think about this is that a technology can push some prices down while also raising demand, incomes and investment in other areas. The net effect on the overall price level over long periods can end up roughly balanced. Inflation over the long run is shaped largely by Monetary Policy and expectations, rather than by any single technology.

Ms Hunter also emphasised timing.

Adoption is rising, but productivity evidence is thin

The RBA's liaison program gives a picture of how quickly businesses are taking up AI. According to Ms Hunter, the share of firms reporting no AI adoption fell from about one-third in 2025 to almost zero in 2026. Firms with limited adoption rose from around 40 per cent to around 60 per cent, moderate adoption from around 20 per cent to 30 per cent, and deep or transformative adoption from 8 per cent to 10 per cent.

Adoption, however, is not the same as payoff. When asked about productivity gains, around 35 per cent of firms reported none, around 30 per cent minor gains, 23 per cent moderate gains and around 11 per cent significant gains. At the level of the whole economy, Ms Hunter was blunt: "So far, there is limited evidence that AI has materially lifted aggregate productivity."

She also noted a less flattering side of current usage: "The term 'AI slop' has entered our vernacular to capture unproductive uses."

The inflation problem in front of the RBA

Set against these long-run considerations is a pressing short-run problem. According to the November 2026 Statement on Monetary Policy (SMP) Overview, "Headline inflation was 3.9 per cent over the year to the September quarter and trimmed mean inflation was 3.7 per cent." The RBA expects headline inflation to peak at 4.5 per cent in the December 2026 quarter, and the Overview says "Headline and trimmed mean inflation are now expected to remain above 3 per cent until end-2027".

Those forecasts imply that whatever AI does for the economy, it is not expected to resolve the current inflation episode. The Monetary Policy Board raised the cash rate target by 25 basis points to 4.85 per cent on 3 November, and its statement said: "The Board will continue to do what it considers necessary to bring inflation sustainably back to target."

Governor Michele Bullock was similarly direct at her media conference: "Returning inflation to target is our priority, and we will do what is necessary to achieve that." Nothing in the RBA's November material suggests technology will substitute for that task.

Investment, Wealth and a word of caution

AI is already showing up in other parts of the economy, even if not yet clearly in productivity statistics. Ms Hunter said data centre investment in Australia had risen "10-fold (from a very low base) over the past three years." In the United States, share prices of AI-related companies had "roughly quadrupled since the end of 2022."

Australians have exposure to that trend. Ms Hunter noted that "around 5 per cent of Australian households' financial wealth is invested in the Equity of AI-related companies, both directly and through superannuation."

She flagged the risk that comes with high expectations. If the returns from AI disappoint, the Assets involved "will be exposed to sharp repricing and possibly disorderly adjustments". That observation is a description of a risk scenario, not a prediction, but it is a reminder that enthusiasm about technology can have financial stability implications.

Jobs: change rather than collapse

Another way AI could influence inflation is through the labour market. Here too, Ms Hunter's message was measured. Citing Jobs and Skills Australia, she said about 4 per cent of workers are highly exposed to automation from AI, while 31 per cent are highly exposed to AI augmenting their work.

"So, exposure to AI does not necessarily mean Job loss," she said. She described the likely pattern as one where "AI will automate some tasks, complement workers in others and create new roles as the economy adapts."

The RBA's liaison evidence on headcount supports a picture of gradual adjustment. In the RBA's liaison, about three-quarters of firms reported no change to headcount, around 12 per cent reported slower hiring or not filling roles, around 8 per cent reported reducing headcount and around 6 per cent reported increasing it.

The bottom line

Sarah Hunter's assessment is that AI's long-run effect on inflation is likely to be "broadly neutral", consistent with earlier general-purpose technologies. Adoption is spreading quickly, but evidence of an economy-wide productivity lift is still limited, and the biggest gains may take longer than expected to arrive. With headline inflation forecast to peak at 4.5 per cent and both headline and underlying inflation expected to stay above 3 per cent until the end of 2027, the RBA's November material gives no indication that technology will ease that path in the near term.