Australia’s Central Bank Says the AI Boom Could Keep Rates Higher for Longer
Direct answer
Australia’s central bank warned on November 9, 2026 that the rush to build artificial intelligence data centres could keep interest rates higher for longer. Reserve Bank of Australia Assistant Governor Sarah Hunter said the boom is adding to demand and pushing prices up now, at a time when the economy is already short of workers, materials and power capacity.
What happened
Hunter spoke at a UBS conference in Sydney on Monday, in the bank’s first major speech on artificial intelligence. She said investment in data centres has risen tenfold over the past three years, and the bank expects about $115 billion to be invested in Australian data centres by 2028, or about 2% of GDP per year.
The Reserve Bank raised its cash rate to 4.85% on November 3, its fifth increase of 2026 and the highest level in 18 years. Hunter said the data centre boom is one reason the bank has kept raising rates, because the building work is competing with the rest of the construction sector for workers and materials.
She was careful to separate the short term from the long term. In the near term, she said, the AI boom mostly lifts demand, which adds to price pressures while supply is constrained. Over time, she said, supply should catch up as data centre capacity and related sectors expand, so the long run effect on inflation is likely to be broadly neutral.
Hunter also said there is limited evidence so far that AI has meaningfully lifted productivity or caused widespread job losses. Hiring of younger workers in jobs exposed to AI looks weaker, but the bank has not found broad job destruction. She compared the AI boom to the rollout of the internet in the late 1990s, a period of strong growth and higher interest rates around the world.
The bank released four new research papers on AI on Monday. One found that 5.3% of Australian households’ financial wealth, out of almost $9 trillion in total, is now invested in AI related companies, up from about 2% in late 2022. Hunter also warned that AI could add to financial stability risks, because asset prices could fall sharply if the returns on AI investment turn out lower than expected.
Why it matters for beginners
This is a useful example of how a central bank thinks about new technology. A boom sounds like good news, and in the long run it may be. But building data centres needs concrete, steel, electricians, grid connections and land, and Australia’s construction sector was already stretched before the AI money arrived. When lots of money chases a limited supply of workers and materials, prices rise.
That matters for borrowers because it is one more reason the central bank may keep rates high. Australian inflation rose to 4.3% in September, well above the bank’s 2% to 3% target, and Hunter’s message is that the AI boom is adding to that pressure rather than relieving it yet.
The productivity point matters too. If AI eventually makes workers and businesses more productive, it could bring prices down over time. Hunter’s message is that this has not happened yet in any measurable way, so the bank cannot count on it to do the work of fighting inflation today.
What to watch next
The Reserve Bank’s final rate decision of the year is due on December 8, 2026. Watch whether the bank holds rates at 4.85% or signals another move, and what Governor Michele Bullock says about the inflation outlook.
Also watch Australia’s October inflation release, due on November 25, 2026. If inflation cools from here, the case for further hikes weakens. If it stays high, markets may start pricing in even more tightening.
Finally, watch whether Australian banks pass on the full November rate rise to variable mortgage holders, and how the data centre pipeline develops. If investment keeps growing faster than supply, the bank’s warning about rates staying higher for longer will carry more weight.
FAQ
What is a data centre? It is a large building that houses the computers and servers behind chatbots, streaming services, search engines and other online tools. Building one needs land, power, cooling, concrete, steel and skilled workers.
Why would an AI boom push inflation up? Because building data centres adds demand for workers, materials and electricity at a time when those things are already in short supply. When demand grows faster than supply, prices rise. Hunter said this effect should fade over time as more capacity is built.
Has AI taken lots of jobs in Australia? Not according to the Reserve Bank. Hunter said there is limited evidence of widespread job losses from AI so far, though hiring of younger workers in AI exposed jobs looks weaker. The bank is watching the jobs data closely.
What is the cash rate right now? The cash rate target is 4.85%, after the Reserve Bank raised it by 0.25 percentage points on November 3, 2026. It was the fifth increase of the year and the highest level in 18 years.
Who is Sarah Hunter? She is the Reserve Bank of Australia’s Assistant Governor for Economics and its chief economist. She spoke at the UBS Australasia Conference in Sydney on November 9, 2026.
Sources
Reuters, November 9, 2026, “RBA’s Hunter says AI has yet to deliver productivity boost, trigger job losses”, https://srnnews.com/rbas-hunter-says-ai-has-yet-to-deliver-productivity-boost-trigger-job-losses/ . Reserve Bank of Australia, November 9, 2026, “Transcript of Question and Answer Session”, https://www.rba.gov.au/speeches/2026/sp-ag-2026-11-09-q-and-a-transcript.html .
This article is for general information and education only. It is not legal or financial advice.
