Highlights

  • Sarah Hunter says AI-driven Demand could press on constrained Supply and push Inflation up in the near term.
  • The Assistant Governor describes AI's long-run effect on inflation as likely to be broadly neutral, not permanently lower.
  • Data centre Investment in Australia has risen ten-fold from a very low base over the past three years.
  • Hunter says it is too early to quantify effects, and Monetary Policy implications remain a research priority.

Artificial intelligence may ultimately improve productivity, but its initial effect could be to increase demand before supply can respond. Reserve Bank of Australia Assistant Governor (Economic) Sarah Hunter told the UBS Australasia Conference in Sydney on 9 November 2026 that AI-related investment could place near-term pressure on inflation. She emphasised that much of the analysis remains hypothetical and that the size of the effects cannot yet be established.

A general-purpose technology

Hunter likened AI to electricity and the internet, technologies whose effects took time and were hard to predict. She said estimates of AI's impact on annual productivity growth over the next decade range from over 2 per cent a year to just 0.1 per cent.

So far, she said, there is limited evidence that AI has materially lifted aggregate productivity. In RBA liaison, about 35 per cent of firms reported no productivity gains and about 11 per cent reported significant gains.

Demand arrives before supply

Investment is already adding to demand. Hunter said the RBA's estimates of data centre investment in Australia have risen ten-fold over three years, from a very low base. Much of it is imported IT equipment, which dampens the net contribution to GDP.

She also pointed to Wealth effects. US AI-company share prices have roughly quadrupled since the end of 2022, and staff estimate about 5 per cent of Australian households' financial wealth is in AI-related equities, directly and through superannuation.

What it means for inflation

In the near term, Hunter said, a demand shock meeting current supply capacity puts some upward pressure on inflation. She said this is already visible in semiconductor and related supply chains, with costs passing through to a narrow set of consumer electronics that carry small weights in the consumer price index.

Some RBA contacts also report data centre construction adding to demand for stretched construction trades. Over time, supply should catch up. Her conclusion: AI's long-run effect on inflation is likely to be broadly neutral, and AI will not continually push inflation down.

Interest rates and bond yields

Hunter said investment demand, possibly alongside falling global savings, could push up the neutral rate of interest. She noted tentative evidence of this, and said RBA neutral-rate estimates have risen since 2021 but remain below the 2000s.

Bond yields have risen over the past couple of months, with Market Participants citing strong demand for capital. The extent is hard to quantify at this stage, she said, and yields will be monitored. That is an observation about conditions, not a policy signal. Lenders' Mortgage and deposit rates are set by each lender and do not move automatically with the cash rate or yields.

Jobs: modest signs so far

On the labour market, Hunter said AI is likely to change work significantly, but aggregate data may mask displacement. In RBA liaison, about three-quarters of firms reported no change to headcount, about 12 per cent reported slower hiring or unfilled roles, about 8 per cent reduced headcount and about 6 per cent increased it.

Employment growth for 15 to 24-year-olds looks weaker in the most AI-exposed occupations. She said the differences are modest and it is too early to tell whether they reflect AI adoption or other factors. Exposure to AI does not necessarily mean Job loss.

What to watch

Hunter said the monetary policy implications are an ongoing research and analytical priority. The speech set out no rate decision or forward guidance. The next scheduled dates are the September quarter CPI on 25 November 2026 and the next cash rate decision on 8 December 2026 at 2.30pm AEDT. These are one official's research views, not a Board decision, and they carry no firm promise about inflation or future interest rates.