The Reserve Bank of Australia has warned that the rapid growth of artificial‑intelligence (AI) infrastructure could push interest rates higher. Assistant Governor Sarah Hunter spoke at the UBS Australasia conference in Sydney, saying that AI investment is already driving up inflation and could lead to further rate hikes in the near term. Hunter noted that data‑centre investment in Australia has increased tenfold over the past three years. She added that AI spending could reach about 2 % of the country’s gross domestic product, creating significant pressure on both the government and the opposition to outline spending cuts. “The increase in demand for investment, potentially at the same time as global savings are falling, could push up the neutral rate of interest,” she said. “Given this is happening globally, they’ll be competing for scarce savings, pushing up interest rates.” Regarding inflation, Hunter said the effect would vary over time. “In the near term, the positive shock to aggregate demand set against the economy’s current supply capacity will put some upward pressure on inflation,” she explained. She added that surging global AI‑related investment has strained supply chains for AI‑enabling products such as semiconductors, and that these upstream cost pressures are being passed through to the prices of downstream goods in advanced economies. Prime Minister Anthony Albanese acknowledged the pressure on Australian families. “My government accepts completely that there are pressures on Australian families. We accept that as well, that we need to find savings in the budget,” he said. Opposition Leader Angus Taylor promised to “reduce the federal regulatory burden by 25 % over our first term in government,” which he said would equate to $40 billion a year in savings for businesses. The Albanese government, which has pursued a policy of unity for its first four and a half years, is now facing growing criticism. Treasurer Jim Chalmers has come under pressure amid a bleak economic outlook, with media reports suggesting speculation about his future in the role. Environment Minister Murray Watt called for an end to leaks, saying, “There’s all sorts of people making all sorts of comments about the Treasury. My view is that whether you’re a member of the government as a backbencher or as a minister, your responsibility is to work together.”
Article source: The West Australian | Image credit: The West Australian