Over the next four decades, Australia will lean on the rollout and advancement of artificial intelligence to fuel economic expansion, even as the global economy becomes increasingly fragmented and volatile. According to the federal Treasury's 2026 Intergenerational Report released on Monday, the rise and adoption of AI could help the nation hit its long-term labour productivity growth target of 1.2% annually, a level consistent with the 2023 report.

Treasurer Jim Chalmers, unveiling the report at the Australian National University, said the strengths that served Australia well in the 2010s, such as Chinese demand for commodities, education, and tourism, will give way to new advantages in renewables and critical minerals, robust institutions and strategic alliances, and AI-powered services. "The advantages we had in the 2010s will shift toward these new pillars," he said.

The report projects Australia's average annual economic growth will slow to 2% by the mid-2060s, down from 3% over the past four decades, citing escalating global conflicts and competition. It also notes that while economic openness will continue to spur growth, curb inflation, and lift productivity, both nations and businesses will need to strike a balance between supply chain efficiency and national security.

"Future economic performance will depend on continuing to enjoy the benefits of well-functioning markets while guarding against the severe impacts of geopolitical instability," the report stated.