The Productivity Commission sets out in detail the massive upside for Australia in introducing AI tools across the economy in its interim report ‘harnessing data and digital technology’.
But it also warns that government financial support for building Australian large language models (LLMs) or the AI factories that train them is a terrible idea.
In this episode of the Commercial Disco podcast, Productivity Commissioner Stephen King says simply that government is “a terrible entrepreneur”.
“The government has no idea where to put the money, and you know that if they start listening to vested interests, the money will almost certainly go into the wrong places,” Dr King said.
“That’s how we ended up with a car industry bogging down our economy for the best part of 70 years,” he said, reflecting 25 years of Productivity Commission policy orthodoxy.
Dr King argues that Australians could have bought cars from overseas for cheaper, and that the industry was not a foundational support for building a local manufacturing sector.
The government support for the car industry produced few spillover benefits for the economy, he says.
“In fact, the big gains in automotive production in Australia occurred when we removed the subsidies for making cars here,” Dr King said. “[This] allowed Australian entrepreneurs to specialise in areas where they had comparative advantage.”
Within the Productivity Commission these are non-controversial views, but they won’t resonate with many in Australian industry who argue that building AI development capability in AI is a critical step toward effective diffusion of the technology through the economy.
For advocates of policies that would enable Australia to be ‘makers’ of tech and not just ‘takers’ of technology made overseas, Dr King’s orthodoxy will set their hair on fire.
Where there is broad agreement is in the opportunity.
Productivity Commission modelling suggests that AI can add $116 billion to Australia’s gross domestic product in 10 years – a staggeringly large number that Dr King said is based on a conservative set of assumptions.
That $116 billion annual windfall is based on AI contributing a 4.3 per cent increase in GDP. That basically means, based on the same population size and ignoring all other contributors to increasing productivity, that would $4,300 in today’s money to every person in Australia.
“That is huge, every year, on an ongoing basis. So if you’re looking at the potential here, it is massive,” Dr King said.
The best thing that government can do to take advantage of AI in this country is to ensure that regulatory impediments are not in the way of AI industry development, and AI diffusion.
The Productivity Commission’s harnessing data and digital technology report argues against the creation of an AI Act, saying most potential harms of AI are already covered by existing regulation.
This does not mean a “light touch” regulatory regime, Dr King says. It simply means where existing regulation is adequate, it should be retained and not duplicated in a separate Act.
“The approach we’re putting forward is not light-touch,” Dr King said.
“Our current consumer laws, for example, covering misleading and deceptive conduct are not light-touch. If you breach them, the ACCC will see you in court.”
“The point we’re making is if you breach them, whether your using AI or not using AI, the ACCC will see you in court.
“There is already a vigorous regulator and appropriate rules in place around that, and that holds for a whole lot of these supposed harms.
“We’re saying, let’s use the existing laws.”
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