OTTAWA — Bank of Canada governor Tiff Macklem said Friday artificial intelligence has the potential to transform the economy, but it will take time for the technology to lift the productivity of workers and make businesses more efficient.

In the meantime, AI may contribute to inflation as companies spend on the staff, data centres and power they need to run new applications, Macklem added.

“AI adoption—and its full effects on productivity—will play out over many years,” Macklem said in a speech at an economics conference in Toronto. Its impact is likely to grow over time, as new applications, business models and companies emerge, Macklem said. “​​This all suggests that we won’t see the full effects of this wave of AI anytime soon,” he added.

Labour productivity in Canada has long been stagnant or declining. The country’s lack of business investment, competition and integration of skilled newcomers into the workforce have created an “emergency,” senior deputy governor Carolyn Rogers said in March.

Macklem, publicly discussing the impacts of AI for the first time, said the technology could provide a significant boost to the economy. In addition to automating specific tasks, the technology could free up the workers it displaces to take on more productive jobs and power new products and services, he said. 

But he noted those improvements are not guaranteed. Some tasks may not prove that easy to automate, while AI may simply be another new technology in a long line that keeps productivity growth humming along without significantly boosting it.

Macklem also acknowledged AI could have other downsides. While previous waves of automation like assembly-line manufacturing have ultimately created more jobs, some people worry companies using robots and generative tools may not leave enough work for humans. So far, there’s not much evidence of overall employment dropping due to AI, Macklem said. 

The technology could pose risks to financial markets, he warned. Banks have long deployed algorithms for trading, and are increasingly using them to inform decisions about lending and insurance. Macklem noted AI could amplify market runs as automated systems all follow the same signals, or discriminate against some customers. 

Macklem emphasized there’s a lot of uncertainty around AI’s impact. “We need to better understand how AI will affect productivity, employment, price-setting behaviour and inflation,” he said. “This work will take some time.”

While he hasn’t previously weighed in as governor, Macklem has been considering AI’s business impact for some time. As dean of the University of Toronto’s Rotman School of Management, he oversaw the expansion of the Creative Destruction Lab, which helps accelerate startups focused on machine learning and other science-based technologies.  

“Within 10 years, I think almost every company is going to have an artificial intelligence strategy,” Macklem said in a September 2016 interview with Canadian Business, noting the management faculty was “training a new generation of students that understand the business opportunities of artificial intelligence.”

But Canadian businesses have historically been slow to adopt new technologies, and AI has so far proved no different. Firms have not been eager to install robots or employ generative tools, which experts say has dragged down productivity.

So far, the central bank has not spotted any major impact on output from AI. “Most companies are not using it for really high-consequence things,” Macklem noted in response to an audience question. “They’re starting with lower-risk things, not transformative, revenue-generating things.”