All the fuss about the RBA meeting yesterday obscured a more important release, at least in my book.
It came via a firm called the Social Policy Group. They are warning that artificial intelligence could obliterate 30% of Australian jobs by 2030.
You can see it for yourself here.
They also argue that Australia’s economy is uniquely ill equipped to handle artificial intelligence because of its lack of complexity.
In other words, Australia exports raw materials and the bulk of the remaining economy is in services or government.
There isn’t much in the way of advanced technology, innovation or high valued add industry.
We can see this dynamic at play via the share market too.
The Australian reports this morning that an analyst recently pitched some of her favourite ideas at an ASX investor day.
Apparently, her top tip was Coles, the supermarket.
I’m not having a crack at her. It may indeed be a good investment idea with a profit in it up ahead.
But Coles is never going to be the next Nvidia or Amazon. It’s a supermarket. It doesn’t exactly scream excitement, massive potential and disruptive tech.
But the analyst has the same problem as you and me, at least as far as the ASX goes. You can only choose from what’s on the board.
Back to that AI report. The thesis it lays out goes something like this.
AI disrupts the low-income jobs first.
Then it goes for the ‘aspirational’ middle class jobs that fuel consumer spending – 60% of Australia’s GDP.
As they come under pressure, consumers lose confidence and hoard what they can. Suddenly the banks find consumers defaulting on their loans, retailers can’t grow sales, and the doom loop continues.
Unemployment rises because Australia doesn’t have a diversified industrial base to absorb the surplus workers.
It is certainly an easy dystopia to buy into.
Let’s see a real-world implication of this…
A friend of mine has made a lot of money in bitcoin lately.
Another friend is urging him to buy a flash house while prices in Melbourne are off the boil – down 20% in some of the suburbs.
This bearish AI scenario means house prices are vulnerable to further falls as consumer incomes are eroded and deflation grips the economy.
Or not, if it doesn’t happen.
Should my friend buy, wait or avoid housing all together?
This little scenario is why the future of AI is the most pressing issue you should be thinking about as an investor. The RBA is a sideshow to the structural shift that is likely happening here.
The question, of course, is whether the report is bang on, a bit right or false.
New tech almost always brings with it the haunting image of mass unemployment. It goes all the way back to the Luddites in England in the 19th century.
It’s never yet been proven true. Innovation fuels new jobs and industries that replace the ones being disrupted.
The same fear rolled around with the arrival of the internet. Look at the wealth creation that’s come from that, even if we don’t use fax machines and cheque books anymore.
There is also timing and psychology at play here.
Look out the window. The Aussie share market is up big this year, house prices are solid across the country and most people have a job if they want one.
A looming AI employment wipeout isn’t on most people’s mind.
But it certainly could get there.
Imagine for a moment that house prices were falling, the share market was in the dumps and suddenly the chat around the BBQ on a Sunday is a couple of people you know displaced through cost cutting from AI.
It’s a fear that could suddenly come to the forefront.
Point being, so often in markets, it’s not what’s actually happening but what people think is happening, or going to happen, that matters.
As yet, mass AI unemployment is on the edge of the bell curve…but could move towards the centre depending on developments.
You need to be watching this. Your long term holds on the ASX are going to get buffeted by what happens here.
As for me, I’m not sure that report is correct. But I’m not willing to dismiss it either.
The best approach? Learning everything you can about AI…before it explodes as the most pressing issue in markets, and your life.
Best wishes,
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Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator
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