Businesses who adopt artificial intelligence (AI) are likely to improve their competitiveness by increasing productivity and potentially profit, according to a new report by Westpac NZ's economics team - while those who don't will struggle.
The report also suggested that increased uptake of AI tools by New Zealand businesses could lead to decreased prices over time, fuelled by productivity gains and increased competition between firms.
Westpac industry economist Paul Clark said AI is critical for augmenting existing jobs, delivering a sharper customer focus, and increasing adaptability and responsiveness to changing circumstances.
"Despite these benefits, most firms in New Zealand remain ambivalent about AI and are not pursuing it with urgency. In part that's because most businesses in New Zealand are small and operationally focused," he said in a statement on the report's findings.
"Other barriers include an inbuilt resistance to change and a lack of trust in AI as a technology. There is also the technical challenge of having to integrate AI within existing systems and data architecture.
"Education is key to overcoming many of these barriers, either to demystify what AI is or to alleviate concerns relating to job losses. Other steps include developing an AI strategy with clearly articulated goals, having the appropriate data governance frameworks and process controls in place, reskilling workers so they can work in an AI powered world, and having access to the appropriate AI integration tools."
As per the report, businesses "who remain tied to the past" and resist AI will lose their competitiveness in the market, as it will become increasingly difficult to match the productivity gains of those who do embrace the new technology.
"That said, as AI adoption deepens overseas and the competitive benefits of it become more widely acknowledged, we think more firms in New Zealand will look to AI for a competitive edge.
"That is likely to set off a virtuous AI investment cycle, which will intensify competition and generate ever greater levels of industry rivalry," Clark added.
New Zealand already is spending around $500 million on AI each year, he revealed, a figure that is only expected to grow as more local businesses move to adopt the technology in line with the rest of the world.
Elaborating on his analysis during an appearance on AM on Friday morning, Clark reiterated that in New Zealand, the larger firms are currently investing more capital into AI than small to medium-sized businesses (SMBs) - mainly "because they can".
"[The report suggests] that if you want to stay relevant in the future, you have to invest in this new productivity tool - it will make you more productive," he told host Ryan Bridge.
However, the findings also suggest that when smaller businesses do take up the technology, they embrace is with more fervour than their larger counterparts - which could ultimately change the dynamic of entire industries by making SMBs far more competitive.
"When [SMBs] do take it up, they completely embrace it: and when they embrace it, they become far more competitive. That changes the dynamic within industries as well," Clark said on AM.
"One of the things the paper says is that if you invest in and embrace AI, you reduce barriers to entry, allowing new market entrants and smaller firms from within the same industry to compete on a more equal footing with larger incumbents.
"That is not to say [larger firms] will not be able to compete. Large firms too have competitive advantages. While they may find it more difficult to completely embrace AI, they will still be able to apply it to specific end uses that deliver superior returns, leveraging off larger proprietary data sets to deliver hyper personalised customer experiences."
He added he and other economists believe that some larger firms - encumbered by silo structures, defined hierarchies and legacy systems - may struggle against smaller, AI powered rivals, which could eventually see a dip in the cost of goods and services as rivalry heats up.
"Firms are competing against each other for share of pocket, basically, and if they're all increasing productivity, we should see that be reflected in price competitiveness," he explained.
When asked by Bridge if the widespread adoption of AI could see New Zealand double its GDP, Clark responded: "I wouldn't like to put a number on it as there's so many factors that affect GDP. However, it is ultimately a tool to actually make you produce more from less."
This "less" could be the removal of equipment or old and outdated machinery [in favour of] the newer, smarter technology, he added.
Addressing the idea that more AI will equal less jobs for real humans, Clark dismissed the concerns, arguing that artificial intelligence will mainly serve to augment jobs.
"The issue around staff I suppose is that in some cases, some staff will lose their jobs; but in the vast majority of cases, and this is something we like to reinforce, it really augments what people do. It really makes your job better," he said.
"I think it'll also create jobs as well. It's not a doom-and-gloom scenario - it will augment jobs and add to jobs as well."
Watch the video above.