The Reserve Bank of Australia has warned that the artificial intelligence boom is adding to inflation pressure in the near term, even though there is still little evidence the technology has lifted productivity or caused widespread job losses.

Assistant Governor Sarah Hunter, speaking at a UBS conference in Sydney on Monday, said the impact of AI on inflation was likely to vary over time. In the near term it is boosting demand and adding to price pressures while the economy is supply constrained, she said, but over time supply should catch up as data centre capacity and related sectors expand.

"If AI delivers broader productivity gains, economies will be able to produce more with the same inputs. As a result, the initial inflationary pressures from AI investment are likely to dissipate," Hunter said.

Productivity gains yet to show

Hunter said there was limited evidence that AI had materially lifted productivity, and that it had not yet had large effects on employment. There were, however, tentative signs of adjustment, with weaker job advertisement and employment outcomes in more AI-exposed occupations and stronger growth in areas where the technology has had less impact, particularly for younger workers.

She said public discussion generally centred on whether AI would replace jobs, but added that the effects of the boom "are likely to be more complex". AI will automate some tasks, complement workers in others and create new roles as the economy adapts, she said, and it may also affect what people spend, through increases in productivity and national income that could lift aggregate consumer spending.

Some households may start consuming more now, before the impact of AI on the economy's potential growth is fully realised, Hunter said. Saving less and borrowing more to bring forward spending is likely to increase pressure on the economy and inflation at a significantly challenging time for Australia.

Rates, data centres and financial stability

A boom in domestic data centre investment has added to demand pressures in the economy and is one reason the Reserve Bank has raised interest rates five times this year, taking them to an 18-year high of 4.85 per cent to fight inflation. Governor Michele Bullock had already identified AI investment as a key concern for the bank following rate rises in September and November.

Hunter said the bank's estimates for data centre investment had increased 10-fold in the past three years. Government figures showed there were 162 data centres in Australia as of March 2026, largely concentrated across Sydney and Melbourne. Much of the spending is on imported machinery and equipment, particularly IT equipment manufactured overseas, which dampens its net contribution to economic growth.

She also warned that AI could increase risks to financial stability, with asset prices exposed to sharp repricing or even disorderly adjustments if investment returns fall short of expectations. "Share and bond prices could fall sharply, potentially causing major disruption to financial markets," she said, adding that markets were becoming increasingly invested in AI despite the challenging economic environment.

The increase in demand for investment, potentially at the same time as global savings fall, could push up the neutral rate of interest, the rate that balances demand and supply of savings globally, Hunter said. Firms competing for scarce savings would push up interest rates, she warned.

The Reserve Bank is retaining a neutral outlook for now, largely thanks to expectations that AI could help address productivity problems that have dogged Australia in recent times. Hunter said the bank was pursuing a broad research agenda to deepen its understanding of AI's implications for financial markets, productivity, labour markets, inflation, financial stability and ultimately monetary policy. The bank's monetary policy board will meet for its final interest rates decision of the year on 8 December, with economist and market expectations for the outcome mixed.