Productivity Commission calls for light touch regulation on AI, rejects 'right to be forgotten'

Its report estimates that multi factor productivity gains above 2.3% are “likely”, though notes there is considerable uncertainty around the precise figures, which would result in a 4.3% labour productivity uplift over the decade. This is based on an examination of evidence underpinning studies that have estimated AI could increase multifactor productivity from anywhere in the range of 0.5% to 13% over the decade.

But it warns this is contingent on ensuring that “poorly designed regulation” doesn’t “stifle the adoption and development of AI and limit its benefits”.

“Australian governments should take an outcomes-based approach to AI regulation – one that uses our existing laws and regulatory structures to minimise harms and introduces technology-specific regulations as a last resort,” the report says.

The PC has further estimated that better data access and use regimes could contribute up to $10 billion to annual economic output.

The context: This is the third of five interim reports released by the Productivity Commission ahead of Treasurer Jim Chalmers' Economic Reform Roundtable later this month. The recommendations are expected to inform aspects of the discussion in Canberra.

In this latest report, the PC has made three artificial intelligence-specific recommendations, including that government undertake a review of the current rules for gaps and that authorities pause steps to introduce mandatory guardrails for high-risk AI until it has done so. It also recommends that AI-specific regulation should be “a last resort” where tech-neutral regulations are not feasible and existing frameworks ca not handle the issues.

One of the areas the commission is exploring where it thinks governments may have a role in clarifying regulation is in copyright and the use of copyrighted materials in training AI models.

In terms of data access, the PC wants the government to establish “lower-cost and more flexible regulatory pathways” to expand data access for individuals and businesses, such as through industry-led data access codes and standardised data transfers.

For privacy, it wants to see an alternative compliance pathway with outcomes-based rules rather than controls-based, and it suggests the government does not introduce a “right to erasure” due to the compliance burden and uncertain benefits for individuals.

Its final recommendation is that digital financial reporting becomes the mandatory default for disclosing entities.

A final report from the PC will be delivered later in 2025, following an additional round of submissions.

What they said: "Like any new technology, AI comes with risks. But we can address many of these risks by refining and amending the rules and frameworks we already have in place," Commissioner Stephen King said.

"Adding economy-wide regulations that specifically target AI could see Australia fall behind the curve, limiting a potentially enormous growth opportunity," he said.

Chalmers said: "We’re optimistic about the role AI can play in strengthening our economy and lifting living standards for more Australians at the same times as we’re realistic about the risks".

"The PC’s report confirms that the impact of AI on our economy is uncertain, but there are good reasons to be optimistic.

"We’re confident we can deploy artificial intelligence in a way consistent with our values if we treat it as an enabler not an enemy, by listening to and empowering workers to adapt and augment their work.

"AI will be a key concern of the Economic Reform Roundtable I’m convening this month because it has major implications for economic resilience, productivity, and budget sustainability."