Australian households have significant exposure to artificial-intelligence stocks, leaving consumer spending and the broader economy vulnerable to a sharp correction, according to internal Reserve Bank documents.
The exposure extends well beyond direct investment in AI-related firms, with superannuation funds providing the biggest link to the sector and most of it concentrated overseas, according to a Sept. 1 paper from the RBA’s domestic markets division released to Bloomberg.
That means a selloff in global AI stocks could erode household wealth and weigh on consumption at home, potentially amplifying a market correction into a broader economic shock, the RBA warned.
It said back-of-the-envelope calculations suggest 5.4% of Australian households’ financial wealth is held in AI stocks, with 1.7 percentage points of that direct equity holdings and 3.7 percentage points via pension funds. Foreign exposure accounts for almost 90% of households’ AI holdings, the central bank said.
Combining earlier research on wealth effects derived from stock market holdings with the new estimates, the RBA paper found a permanent 20% decrease in the price of AI stocks would lead consumption to be 0.7% lower in the long run.
“Should that spill over to other equities, consumption would fall by a much larger 2.4%,” it said.
The RBA cautioned that the estimates may overstate the impact because they assume households respond equally to changes in directly held shares and equities held through superannuation, which consumers may monitor less closely until they approach retirement.
Nervousness over AI-related risks has intensified as billions of dollars pour into the technology, fueling debate over whether valuations have become stretched and what a sharp market correction could mean for the global economy.
The RBA’s findings point to a potential second hit to household wealth at a time when Australians are already nursing heavy losses from falling property prices.
A separate Aug. 20 paper by the RBA’s Economic Group, estimated a 1% increase in housing wealth lifted the long-run level of household spending by 0.16%, with about half of the effect arriving within two quarters.
In the current downturn, these calculations are applied in reverse, and Bloomberg Economics reckons A$509 billion in wealth has been shed in housing during the downturn between March 31 and Oct. 6.
“Further declines in house prices are likely following the RBA’s decision to deliver a fourth rate hike in September,” said James McIntyre, who covers Australia for Bloomberg Economics. “This suggest a A$40-A$50 billion headwind to household spending through the final quarter of this year and into early 2027.”
In another document marked “highly restricted,” the RBA estimated Australia’s real neutral interest rate — the inflation-adjusted level that neither stimulates nor restrains the economy — at between 0.4% and 1.2%.
The RBA has publicly said estimates of the real neutral rate have risen in recent times, though it has stressed they are highly uncertain.
The central bank last week lifted its key rate to a 15-year high of 4.6% while in August, headline inflation came in at 4%, well above the RBA’s 2% to 3% target band.
The RBA has now boosted borrowing costs four times this year for a total increase of 1 percentage point, as local capacity constraints have been exacerbated by the energy shock unleashed by the US-Iran war, driving consumer prices ever higher.
Several economists, including former RBA Assistant Governor Luci Ellis, now chief economist at Westpac Banking Corp., reckon the rate-setting board will boost borrowing costs again in November to 4.85%.
The RBA’s models put the so-called NAIRU — the unemployment rate consistent with stable inflation — at around 5%. But policymakers apply judgment to lower the assumption to 4.6%, according to the documents. That’s the level unemployment stood at in August.
RBA staff said in the documents that they plan “to stay attentive to upside risks” to their central NAIRU assumption.
Bullock recently described the nation’s labor market as “a bit tight” and said an unemployment rate of between 4.5% and 5% would likely take enough heat out of the jobs market and ease inflation.
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