Australia's productivity declined by 5.3% between March 2022 and March this year, as living standard growth softened despite technological advancements like artificial intelligence amid a reduced reliance on mining to lift incomes, said Westpac Banking (ASX:WBC, NZE:WBC) on Wednesday.

The mining sector was responsible for over 50% of the growth in living standards in the country between 2000 and 2020, primarily due to rising terms of trade and high levels of investments.

However, an analyst at Westpac in a note said the sector is unlikely to drive future income growth as the mining boom has waned with stalled investment.

Without new sources of growth, living standards are set to stretch slowly, potentially costing the average Australian about AU$75,000 in income over the next decade, it added.

Westpac said, "faster productivity growth can be an offset" if emerging opportunities like AI, machine learning, and quantum computing can be tapped into, which have the likelihood to reverse the slowdown.