How AI may impact our economy, according to Treasury officials

A Treasury paper analysing the potential impact of artificial intelligence technology on our economy included officials asking if it could take their jobs. Photo / Getty Images

As an advanced economy, New Zealand could realise productivity gains by adopting artificial intelligence (AI), but could also be more at risk of job losses than lower-skilled labour markets, according to Treasury officials.

However, our slow adoption of technology historically, weak domestic technology expertise and low levels of investment in research and development compared with the OECD average could limit any opportunity to be gained here.

“The advent of AI underscores the need to address these barriers,” Treasury analysts Udayan Mukherjee and Harry Nicholls wrote in the paper titled The impact of artificial intelligence – an economic analysis.

Their paper was intended to be a “conversation-starter”, they wrote.

“While the economic impacts of AI are still emerging as the technology continues to develop, it seems likely there will be a multifaceted impact on New Zealand’s economy.”

In regards to employment, the pair wrote that generative artificial intelligence could have an outsized impact on our higher-skilled workforce.

“AI’s ability to automate more complex tasks could mean that advanced economies such as New Zealand are more vulnerable to AI’s employment impacts compared to emerging economies with a higher proportion of lower-skilled jobs.”

If the impact occurred across the workforce slowly, it could reduce the economic pain.

“A prolonged reallocation could mitigate some of the scarring that could come with a more dramatic workforce displacement.”

The paper cited research from Goldman Sachs which estimated 7% of United States workers could be displaced.

“The good news is that worker displacement from automation has historically been offset by creation of new jobs, and the emergence of new occupations following technological innovations accounts for the vast majority of long-run employment growth,” Goldman Sachs economic researchers wrote in March last year.

The impact on New Zealand’s labour force was ultimately unknown and would be determined by how many jobs were created by the technology’s rise.

In the absence of an answer, the Treasury paper urged policymakers to focus on skills, as suggested by the OECD last year, including identifying what skills could be replaced by artificial intelligence and the skills needed to support its adoption.

One question the paper posed to policymakers was: “Given the uncertainty, how can we help future cohorts to make informed decisions about career paths?”

Assessing its potential cultural impact here, the Treasury paper warned that generative AI could have biased algorithms and marginalise voices if it drew information from limited sources, although it could also support cultural preservation as was being done in Iceland with OpenAI’s ChatGPT training on Icelandic language data.

“New Zealand’s regulatory approach for AI will need to consider the implications for Māori and Te Tiriti o Waitangi (Te Tiriti), or the Treaty of Waitangi, given the extent of potential impacts on Māori rights and interests.”

Longer term, New Zealand would need to align its regulatory approach with the rest of the world, and could benefit from updating its current technology frameworks, such as Britain was doing with AI-generated content and copyright protection, the paper read.

It suggested further research be done on how New Zealand could accelerate the adoption of AI, lift public-sector productivity and possibly improve service levels, as well as examine its intersection with our economic security.

“Particularly if AI development is concentrated in a small number of large multinational overseas-based technology companies.”

It also encouraged assessing its potential impact on employment and small to medium-sized businesses “given their significance to the New Zealand economy”.

Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment and has covered business and economics for television and radio broadcasters.