Global economy risks fragmentation! Australia bets on AI as a new growth engine

Golden Ten Data APP reports that in the next 40 years, as the global economy becomes increasingly fragmented and unpredictable, Australia will rely on the deployment and development of artificial intelligence (AI) to drive economic growth. According to the Australian Treasury's "2026 Intergenerational Report" released on Monday, "the rise and application of AI may help achieve" the assumed long-term labor productivity growth rate of 1.2%, which is similar to the forecast in the 2023 report.

Australian Treasurer Jim Chalmers, speaking at the Australian National University while unveiling the report, said: "Our advantages during the 2010s are shifting to new strengths in renewable energy and critical minerals, robust institutions and strategic partnerships, and AI-powered services."

The data center boom has become a rare bright spot in Australia's economy. Westpac estimates its scale will be comparable to the expansion of the liquefied natural gas (LNG) industry in the early 2010s. However, in the short term, this trend may exacerbate supply constraints in the Australian economy, which have already pushed up inflation and forced the Reserve Bank of Australia to raise interest rates.

In the past two years, investment in Australian data centers has surged

The report forecasts that by the mid-2060s, Australia’s average annual economic growth rate will slow from 3% over the past 40 years to 2%. Conflict and competition are intensifying, the report notes. While economic openness will continue to drive growth, reduce inflationary pressures, and boost Australia’s productivity, countries and companies will need to balance supply chain efficiency against national security. The report states: "Future economic performance will depend on remaining open to benefit from well-functioning markets, while guarding against disruptive shocks from geopolitical instability."

Chalmers stated that Australia’s fertility rate will decline "further and faster" than had been expected just three years ago. He said that Australia's population, currently estimated at 28.1 million, is expected to grow to about 39 million by the mid-2060s—lower than previous forecasts of over 40 million.

The report also emphasizes that long-term challenges from housing, demographic changes, and other structural economic trends are "intensifying pressures on intergenerational fairness." It estimates that "if home ownership rates had stayed at 1981 levels, based on the latest available data, about 250 thousand households in the 25–34 age range would own their own homes."