AI Will Blow Up the Australian Economy (And Nothing Can Stop It)

What happens when $3.34trn of household debt meets the most deflationary technology in the history of humanity?

The Australian economy completely blows up.

No, I’m not exaggerating.

Okay, maybe just a little.

But not really.

Here’s why.

Artificial general intelligence (AGI) will be capable of performing all knowledge work currently completed by humans, by definition.

This is deflationary, because rather than paying human salaries, you are paying for the cost of compute necessary to run the AGI, which is expected to be significantly cheaper.

In this type of environment, the maximum amount you would pay a human employee to do the equivalent job an AGI could is something like:

The cost of the compute, minus some formula for the efficiency and reliability gains you lose by employing a human (since AGI will be significantly faster, smarter and cheaper).

This means the upper bound of their salary is going to be much, much lower in the best case, and in the worst case they are going to be replaced regardless because they will be dumber and slower than the AGI.

So it’s hugely deflationary.

Many of these white collar workers (lawyers, software engineers, managers, etc) are going to go from cushy $150-$200k per year white collar jobs where they work from home half the week, to searching for a job that no longer exists.

That income simply disappears, and that has a multiplicative effect on the economy downstream of it - consumption in the working professional age group will decline significantly.

The current AI models are not AGI - they cannot operate autonomously to achieve the same types of long-horizon tasks that humans can in order to achieve goals, yet.

Many think we might have AGI by 2027 at the earliest.

But most agree within the next decade it will be achieved.

Let’s ignore the timelines and just work through the logic - because it is coming, sooner than you think.

If we consider ‘white collar workers’ as ‘managers’ plus ‘professionals’ in the ABS data, they make up approximately 39% of Australia’s labour force.

Okay, so we have a lot of white collar workers.

Is there any attempt to stop people training for jobs we know simply are not going to exist pretty soon?

No.

Over half of all high school graduates enrol in an undergraduate degree, and somewhere between two-thirds to three-quarters of those enrolments are in white collar fields (Management & Commerce, Society & Culture (incl. Law), Health, Education, and Information Technology).

So, we have a bunch of people currently in jobs we know AGI is going to replace, and we have a bunch of people studying for jobs we know AGI is going to replace.

And we have a bunch of corporations reducing graduate intakes because they understand what most don’t: these jobs are never coming back.

So, why is there not a single person in a position of power raising the alarm about this?

You know why I am concerned?

It starts with D.

Debt.

There is so much debt.

Household debt. Student debt. Auto loan debt.

We are a country of chronic gamblers, and I am afraid that like a cocaine addict at 4am at the Casino down to his last chip, we are about to gamble it all away.

In fact, that’s not right.

We have already gambled it all away.

We are the addict who is in the ambulance on the way to the hospital, heart beating but only just.

Because there is no escaping the inevitable path we are now on.

The 39% of white collar jobs do not need to disappear overnight for Australia to be in deep shit.

All that needs to happen is some combination of the following: