RBA warns AI slump could hit Australian spending

Australia’s artificial-intelligence boom presents the Reserve Bank with risks in both directions: heavy investment may add to near-term inflation before productivity gains materialize, while a sharp decline in AI stocks could weaken household wealth and spending. Former RBA official Jonathan Kearns said imported equipment would limit some inflationary pressure, but domestic spending would still boost demand; he expects one more rate increase this year. Separately, RBA estimates indicate AI shares account for about 5.4% to 5.5% of household financial wealth, mostly through superannuation funds and largely in overseas markets. A lasting 20% fall in AI stocks could reduce long-run consumption by about 0.7%, potentially rising to 2.4% if losses spread to other equities, though the bank cautioned that its estimates may overstate the effect. With housing losses also weighing on household spending, the competing inflation and growth risks leave further rate moves dependent on incoming data.