McKinsey examines impact of generative AI on Australian workforce

12 March 2024 Consultancy.com.au 5 min. read

The introduction and rapid adoption of generative AI has seen consultancy McKinsey & Company revise its previous figures on the potential impacts of automation on the Australian workforce by 2030.

Global management consulting firm McKinsey & Company has taken a look at the potential impact of generative AI on the workforce in Australia and concluded that 62 percent of the country’s labour is presently spent on tasks which could otherwise be automated with existing technologies. That number has jumped significantly in the five years since McKinsey conducted its last local analysis, due to the rapid emergence of generative AI.

In the words of McKinsey, “Australia’s economy in 2019 was at the tail end of a three-decade boom and losing momentum fast – yet the automation wave was on the horizon, bringing the possibility of inclusive economic growth and an uplift in productivity. Our study found that, to realise this promise, Australia would need to embrace rapid automation adoption and facilitate social inclusion in the process. Half a decade later, a lot has changed.”

McKinsey examines impact of generative AI on Australian workforce

Source: McKinsey

Yet, from an exponential tech development perspective, it’s the next half a decade from now which is, let’s say, rather alarming. Back in 2019, McKinsey calculated that 44 percent of work activities in Australia could have been automated at the time, with an upper-end estimate that 81 percent of tasks could hypothetically become automated by 2030 depending on the pace of development and adoption. The corresponding figure of its updated analysis is 98 percent.

Effectively, McKinsey – not shy as one of world’s leading strategy and management consultancies in promoting the big numbers as to the impact of technology – now says its estimates were way under. In terms of its mid-point modelling on likely scenarios factoring in a range of barriers, the introduction of generative AI and its rapid in-roads into the ‘knowledge’ sectors has seen the 2030 projection revised upwards by eight points, from 19 percent to 27 percent of all ‘task hours’.

McKinsey examines impact of generative AI on Australian workforce

Source: McKinsey

The scary part, amid an already rapidly shifting horizon and its socio-economic implications, is if McKinsey’s figures turn out in five years from now to be underestimated once again, by the same factor or greater. The data on the work hours which have already been automated since 2019 and any recent GenAI acceleration isn’t fully clear, but in 2019 McKinsey estimated that up to 6.5 million full-time equivalent positions could be displaced by the end of this decade.

The firm’s latest modeling suggests that, as it stands, almost 10 percent of the Australian workforce may be required to transition out of their current roles before the decade is out. Here, McKinsey’s most recent report examines what the country’s mix of occupations could look like by then, taking in factors such as the development and cost of implementing solutions and the social or regulatory dynamics which could cause a substantial lag between technical potential and realisation.

McKinsey examines impact of generative AI on Australian workforce

Source: McKinsey

In performing its previous analysis, McKinsey Global Institute mapped emerging automation technologies against more than 2,000 specific work activities across 800 occupations, and found that three quarters of potential automation would be concentrated in just nine sectors, including six of the largest areas of local employment; retail, admin & government, construction, manufacturing, food & beverage and hospitality, and transport & warehousing.

The other three included professional services, due to the scale of the industry and variety of activities. The difference now, with the introduction of generative AI, is that ‘white-collar’ work and higher-wage roles in areas such as professional, educational, scientific, technical and financial services have rocketed to the top of the list. McKinsey contends that these professions could now experience the most profound impact from gen AI, completely transforming skills-demand in Australia.

McKinsey examines impact of generative AI on Australian workforce

Source: McKinsey

While noting the access to higher education and skills training required to navigate such a transition, McKinsey frames the dramatic occupational upheaval as a huge opportunity for the national economy, with GenAI alone potentially lifting Australian labor productivity by as much as 1.1 percentage points a year through to 2030. Albeit unlikely to reach full fruition, the combined potential with other automation technologies ranges up to 4.1 annual percentage points.

“Despite headwinds such as an aging population, if Australia were to achieve even half of the potential productivity uplift, it could be on track to rekindle the faster economic growth of the post-1990s heyday,” state the McKinsey report authors, led by Sydney-based senior partners Chris Bradley and Jules Carrigan. “However, this potential may only be realised if employers, governments, and educators are able to adopt the technology in a bold and thoughtful way.”