AI could be the solution for Australia's productivity problem

Artificial intelligence (AI) could be the solution to Australia's productivity problem, according to a recent report from ABC News. Investment in AI technologies by companies in the country has helped save thousands of working hours, with many looking to adopt AI in the next six to 12 months. However, there are concerns about the impact of AI on jobs, with research by Statista suggesting it could lead to the loss of 83 million jobs worldwide. While Australia's rate of AI adoption is below the global average, businesses are increasingly looking to the technology for productivity gains rather than reducing headcount. According to Goldman Sachs, AI could improve the world's GDP by 7% over the next decade.

The Mandala firm has modelled the top jobs that are likely to be impacted by AI in Australia, revealing that lawyers, judges, consultants, psychologists, counsellors and telemarketers are among the top ten occupations most affected. While white-collar jobs are expected to be most affected, some jobs will remain unaffected, such as those that require a more generalised understanding of the world, or jobs that involve a lot of interaction between people.

The impact of AI on jobs is not all negative, however. A recent survey by Microsoft revealed that 65% of workers would willingly give AI some of their more menial tasks. Teachers, for instance, could benefit significantly from AI, which could become an individualised tutor for every student, catering to their specific learning needs.

While AI could lead to job losses, it could also lead to the creation of new jobs that don't yet exist. AI is expected to be a game-changer and a major impact on the workforce, but most employers are not looking to reduce headcount. Instead, they are focused on using AI for productivity gains. Australia's rate of productivity has fallen by 3.5% in the last 12 months, resulting in a rise in unit labour costs with a direct impact on the country's economic wellbeing. The adoption of AI could lead to a significant improvement in productivity and help Australia remain competitive in the global marketplace.

Australia's Productivity Plunge: Should We Be Concerned? Insights from the Reserve Bank

The productivity of Australian workers has experienced a significant decline, raising concerns among experts and prompting the Reserve Bank of Australia (RBA) to closely monitor wage increases that may fuel inflation. The recent drop in productivity has prompted Guardian Australia to delve into the key issues surrounding this concerning trend.

Productivity, as defined by the Productivity Commission, refers to the ability to produce more goods and services with the same amount of inputs, ultimately contributing to an improved material standard of living. However, a recent report from the commission revealed that annual productivity growth in Australia during the decade leading up to 2020 was a mere 1.1%. This sluggish pace means it would take 64 years to double output, compared to the average rate of improvement recorded in the previous six decades, which would have achieved the same outcome in just 39 years.

The decline in productivity is especially notable in sectors such as agriculture, mining, and manufacturing, which are more susceptible to automation. These sectors are experiencing a diminishing share of Australia's economy, while the service sector, known for its difficulty in achieving productivity gains, continues to expand.

The RBA governor, Philip Lowe, has recently emphasized the issue of subdued productivity growth. In fact, during the RBA's latest interest rate hike, Lowe cited the sluggish productivity growth and rising unit labor costs as factors that could impede the desired pace of inflation reduction. Furthermore, recent national accounts figures from the Australian Bureau of Statistics revealed a sharp decline of 4.6% in productivity, as measured by GDP per hour worked, from the previous year.

The exact causes of this productivity downturn remain unclear, as Lowe himself stated that they are not well understood. The pandemic may have exacerbated the situation, as many firms focused on survival rather than growth, supply chains were disrupted, labor shortages occurred, and investment was delayed. Additionally, the shift to remote work may have impacted productivity levels, with anecdotal evidence suggesting that some individuals are less efficient while working from home.

While interpreting productivity data can be challenging, given the need to account for technical change, scale, and cyclical effects, it is crucial to analyze the market sector and industry trends cautiously. Baseline effects and statistical anomalies can amplify the size of recent movements, making accurate interpretations difficult.

Although the decline in productivity raises concerns, there are factors that may mitigate the potential negative impact. The drop in the jobless rate to record lows in recent years allowed employers to hire individuals who previously struggled to find work. As the jobless rate starts to rise again, less productive workers may be let go, potentially improving the average output of remaining staff.

Employer groups may highlight the lack of productivity gains to resist wage increases. However, the impact on workers' wages and the distribution of productivity gains are also critical considerations. While wage growth without corresponding productivity improvements may delay the path to lower interest rates, inflation and housing price surges are among the other concerns highlighted by the RBA.

The decline in productivity is a significant challenge that Australia faces. It requires careful analysis, collaboration between policymakers and industry stakeholders, and targeted efforts to boost productivity in key sectors. By addressing this issue, Australia can enhance its economic resilience and improve its material standard of living over the long term.