The Treasury has published an Analytical Note today covering aspects of how artificial intelligence (AI) might affect New Zealand.

The impact of artificial intelligence - an economic analysis (AN 24/06), written by Harry Nicholls and Udayan Mukherjee, introduces economic frameworks for assessing the impact of artificial intelligence. It then provides a qualitative assessment of the implications of AI for New Zealand, given what we know about the underlying economic trends here.

This paper addresses three issues, summarised as follows.

- Impacts of AI on productivity and investment: Our understanding of the impacts of AI on productivity and investment is emerging as the technology develops. AI can be seen as a ‘General Purpose Technology’, that slowly diffuses across a range of sectors, but it may also serve as an ‘Invention of a Method of Invention’, transforming innovation across a wide range of fields. However, New Zealand’s traditionally slow diffusion of new technology and low levels of investment in intangible capital could be a barrier to realising AI’s benefits.

- Impacts of AI on employment and the labour market: The net impact of AI on employment and the labour market, balancing job destruction (‘displacement’) with creation (‘reinstatement’) remains uncertain. AI’s disproportionate impact on higher-skilled tasks might mean employment in higher-skilled, advanced economies like New Zealand is more exposed to the impacts of AI. A focus on skills will be important both to help workers transition to a labour market where AI is widely used, and to support the diffusion of AI.

- Development of regulatory approaches for AI: Globally, regulatory approaches to AI can broadly be divided between countries that have adopted comprehensive AI-specific legislation (in the European Union and China), and countries that rely on existing regulatory frameworks (the United Kingdom, the United States, Singapore and Japan). For New Zealand, existing regulatory frameworks, like copyright laws, may need to be updated to address the challenges of AI. Over time, aligning our regulations with other countries, where it makes sense for New Zealand, will be important to support the diffusion of AI.