Artificial intelligence investment is driving up short-term costs and could keep interest rates higher for longer, according to the Reserve Bank of Australia.
Sarah Hunter, the Reserve Bank’s assistant governor and chief economist, warned that the surge in data center construction is showing signs of competing against the construction sector for trade workers.
Speaking at the UBS Australasia Conference in Sydney on November 9, 2026, Hunter stated that while AI may eventually boost productivity, its immediate impact is inflationary. She noted that the central bank expects $115 billion to be invested in Australian data centers by 2028, equivalent to about 2% of GDP per year, according to The Sydney Morning Herald.
AI Investment Boom Mirrors Internet Rollout Growth
The scale of the AI building boom has surprised the Reserve Bank and other observers, with investment in data centers increasing ten-fold over the past three years. She suggested this transition mirrors the internet rollout of the late 1990s and early 2000s, a period characterized by strong economic growth and higher interest rates globally.
There is tentative evidence of this happening with AI; our estimates for the neutral rate have risen in recent years, and bond yields have increased over the past couple of months with market participants citing strong demand for capital as a key driver,
Hunter said.
RBA’S HUNTER SAYS AI-DRIVEN DEMAND WILL PUT UPWARD PRESSURE ON INFLATION IN THE NEAR TERM GIVEN CURRENT SUPPLY CAPACITY, BUT THAT SUPPLY WILL CATCH UP OVER TIME, LEAVING AI’S LONG-RUN EFFECT ON INFLATION LIKELY BROADLY NEUTRAL
Computing Infrastructure Expansion Creates Localized Economic Bottlenecks
The rapid expansion of computing infrastructure is creating localized bottlenecks in the Australian economy.
According to data provided by the Reserve Bank of Australia, while this buildout is essential for future capacity, it currently acts as a source of demand that the economy is struggling to meet without triggering price increases.
Productivity Gains Remain Unverified
Despite the scale of investment, the RBA has found little evidence that AI has yet delivered a meaningful lift to national productivity. Hunter noted that the bank’s liaison program indicates AI has not yet impacted most firms’ headcount, nor is it expected to change employment trends over the coming year.
Her assessment contrasts with the long-term potential of the technology. Hunter likened the current AI boom to the internet rollout of the late 1990s, suggesting that while the transition period involves higher interest rates and heavy spending, the long-run effect on inflation should be broadly neutral once supply catches up with demand.
🚨 NODEWIRE — ALERT RBA'S HUNTER: IN NEAR TERM, AI'S POSITIVE IMPACT ON AGGREGATE DEMAND VERSUS ECONOMY’S CURRENT SUPPLY CAPACITY WILL PUSH INFLATION HIGHER
Financial Stability Risks
The RBA is monitoring the financial implications of the AI sector closely as domestic exposure increases. Research released by the bank on Monday shows that 5.3% of Australian households’ financial wealth is now invested in AI-related companies, compared to just 2% in late 2022. This wealth is currently estimated at nearly $9 trillion.
Hunter cautioned that this rapid accumulation of assets creates vulnerability, adding a central bank voice to growing market unease over valuations and funding. The Reserve Bank has intensified its focus on these economic ramifications, having released four separate research papers on the topic on Monday.
Questions About AI and the Economy
How does the RBA’s view on AI influence current interest rates?
The RBA views the AI-related investment boom as an inflationary force in the near term. This supports the bank’s current tightening bias, as officials attempt to manage demand in a supply-constrained economy. The bank’s stance continues to keep the focus on the risk of further rate hikes.
Are Australian jobs currently at risk from AI adoption?
According to the RBA’s research, there is little evidence of broad job losses so far. Hunter reported that while there are tentative signs of weaker job postings in occupations highly exposed to AI, there is no indication of a widespread decline in employment.
What is the expected timeline for these economic pressures to ease?
The RBA expects that supply will catch up with demand as data center capacity expands over the next several years. Hunter indicated that as broader productivity gains materialize, the initial inflationary impulse from the AI buildout is expected to fade.
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