AI to reshape Canada's economy, jobs, and productivity

Bank of Canada External Deputy Governor Michelle Alexopoulos outlined artificial intelligence as a significant technological advance with the potential to boost productivity and raise living standards.

She noted that while AI's core technology has evolved for 75 years, recent advances have made it far more powerful and accessible.

The Bank of Canada is closely monitoring AI's impact on productivity, economic growth, employment, and inflation, as well as its implications for financial markets and stability, including concerns about overinvestment and cyber attacks.

AI adoption in Canada is gaining momentum, quadrupling from 3 percent of businesses in 2022 to around 12 percent by 2025.

However, adoption varies significantly across sectors, with over 30 percent of finance and insurance firms using AI, compared to just 1.5 percent in accommodation and food services.

This concentration means overall productivity gains may take time to materialize.

Alexopoulos contextualized AI by comparing it to past general-purpose technologies (GPTs) such as steam engines, electricity, and computing.

She highlighted that GPTs are built around a single core, fundamentally change business operations, and generate significant spillovers, including investment in supporting infrastructure and complementary innovations.

While AI exhibits many characteristics of a GPT, its full economy-wide spread and spillover generation are yet to be confirmed, as it remains in early stages of adoption.

The speech noted a massive ramp-up in AI data centre investment, reaching US$400 billion in 2025, which is expected to make advanced AI tools cheaper and more accessible for Canadian businesses.