RBA Analysis Indicates AI Stock Decline Could Impact Australian Consumer Spending

Internal documents from the Reserve Bank of Australia (RBA) reveal that a significant downturn in artificial intelligence (AI) stocks could adversely affect consumer spending in Australia. The RBA estimates that approximately 5.5% of household financial wealth is tied up in AI stocks, primarily through superannuation funds, with nearly 90% of this investment in overseas companies. A permanent 20% drop in AI stock prices could lead to a long-term reduction in consumption by about 0.7%, escalating to around 2.5% if the losses extend to the broader equity market, although RBA staff caution that these figures may overstate the actual impact due to the indirect nature of the investments.

The warning comes at a time when Australian households are already facing financial strain from declining housing prices. Bloomberg Economics estimates that around A$510 billion in housing wealth has been lost since March 2026, which is expected to create a drag on spending of A$40 billion to A$50 billion into early 2027. The RBA has noted that a 1% increase in housing wealth typically boosts long-term household spending by about 0.16%, with a significant portion of this effect realized within two quarters.

The RBA's analysis also touches on the labor market, suggesting that the non-accelerating inflation rate of unemployment (NAIRU) may be around 5%, although current unemployment stands at 4.6%. This discrepancy indicates that the labor market may be tighter than the RBA's assumptions, potentially justifying further interest rate hikes. Following a recent increase in the cash rate to a 15-year high of 4.6%, economists are anticipating another hike in November, particularly in light of ongoing inflationary pressures. Upcoming policy signals will be informed by the RBA's meeting minutes and inflation data set to be released later this month.

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Source: KLEA News