Economic Reform Round Table Should Focus on AI and Robots

The economic reform round table in August should not devolve into a three-day debate on tax reform. While tax and budget sustainability are crucial, the assembly of 25 citizens would be better served by focusing on the transformative potential of artificial intelligence (AI) and robotics.

The round table could start with a briefing on US President Donald Trump’s upcoming AI Action Plan, scheduled for July 23. They should also review China’s ambitious strategy to become the global leader in AI by 2030. These insights will provide a comprehensive understanding of the global AI landscape.

Jim Chalmers, in December, commissioned the Productivity Commission to produce five reports on the pillars of productivity. Despite the 453 ideas submitted by the public, the round table should be reminded of the urgent need for action. A recent Financial Times article highlighted Meta Platforms Inc’s multimillion-dollar sign-on bonuses for AI engineers from OpenAI, the developer of ChatGPT. This underscores the intense competition and the significant investment in AI.

Meta CEO Mark Zuckerberg is leading the charge to build a team capable of creating AI that surpasses human intelligence. Despite his efforts, OpenAI’s staff has been resistant. The combined market value of the leading AI companies—Meta, Alphabet, Microsoft, Amazon, and Nvidia—is $20 trillion, nearly twice the value of all houses and units in Australia. This staggering valuation is a clear indicator of the potential economic impact of AI.

Businesses are exploring two primary approaches to AI: top-down and bottom-up. Top-down involves executive leadership using AI to replace human workers in tasks like software coding, data entry, and customer service. Bottom-up, on the other hand, focuses on individual employees using AI to enhance their job performance. Writing effective prompts is crucial for bottom-up AI applications, as it significantly improves AI’s effectiveness.

Henry Badgery, founder of AI consulting firm Fourday, emphasizes the importance of writing good prompts. His company’s “prompt library” and Prompt Cowboy tool help clients create detailed, effective prompts. According to Badgery, businesses can achieve productivity increases of 30-40% with AI, but many are failing to see value due to improper usage.

To be pragmatically useful, the round table should focus on two key tasks. First, they should develop a national system to help small to medium enterprises and employees write better AI prompts. Second, they should modernize the welfare safety net to ensure that companies can adopt AI without contributing to societal breakdown. This includes rethinking unemployment benefits to better support workers in an AI-driven economy.

The current JobSeeker system is inadequate, with insufficient funding and an outdated points system. A Universal Basic Income may be too extreme, but the government should prepare for a period of more permanent unemployment. Embracing AI requires a robust safety net, and this may necessitate new tax revenue. Options include a wealth or inheritance tax, or increasing the GST.

Historically, major tax reforms in Australia have introduced new taxes to address revenue shortfalls. Given the current fiscal challenges, increasing the GST to 15-20% may be necessary. However, to mitigate the regressive nature of GST, UNSW Professors Richard Holden and Rosalind Dixon propose a threshold of $12,000 for GST-free spending, with a refund system to offset the impact on lower-income earners.

The round table should consider this proposal and then focus on the real business of AI and robotics. By addressing these issues, they can help ensure Australia is well-prepared for the technological revolution ahead.