RBA calls AI boom a risk to inflation in Australia
The Reserve Bank of Australia considers an unexpectedly strong global boom linked to artificial intelligence to be one of the risks of higher and more persistent inflation. The bank’s deputy governor, Andrew Hauser, said inflation has remained above the target level for a long time, and the regulator could raise rates more than it otherwise would if necessary, ABC News Australia reports.
Among the risks to inflation, Hauser also named the crisis in the Middle East and the weak supply capacity of the Australian economy.
Data centres increase demand
Reserve Bank chief economist Sarah Hunter said the regulator is receiving reports of workers being recruited for data centre construction with higher wages. According to her, the drive to build such facilities quickly is boosting demand and cost pressures in the construction sector.
Hunter also pointed to double-digit growth in business investment over the past nine to 12 months, a significant part of which is accounted for by data centres. A study by the Committee for Economic Development of Australia showed that business investment reached 12.6% of GDP, the highest level in more than a decade.
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Committee economist Julie Toth noted that investment growth was almost entirely driven by the information, media and telecommunications sector, where companies are increasing spending on data centres, cloud computing and AI infrastructure. Investment in this sector nearly doubled over the year.
Rate expectations
According to CBA chief economist Luke Yeaman, the Australian economy is slowing, but not quickly enough from the regulator’s perspective. In his view, an additional rate increase could further weaken economic growth and bring it closer to the country’s productive capacity.
Markets assessed the probability of the RBA raising the rate to 4.6% on September 29 at no less than 75%. They also priced in two nearly guaranteed increases by February and the possibility of a third by the middle of next year. A rate of 4.85% would be the highest since rates were cut at the end of 2008 in response to the global financial crisis.
Hauser said people are frustrated by inflation, and a Reserve Bank survey showed that two-thirds of respondents include it among their top three economic concerns. At the same time, only 25% of those surveyed said that higher rates ultimately reduce inflation, while more than half believe they lead to its increase.
