While automation and offshoring are being sold as efficiency wins, the real economic payoff lies in using AI to augment workers, not replace them, according to a new report.
In Rethinking Offshoring and AI, Anthosa Consulting models the impact of two diverging futures: one where industries lean on AI to offshore or automate roles, and another where they use it to boost productivity and job quality at home.
The difference, it finds, could reshape Australia’s economy.
Businesses that harness AI to empower workers – not eliminate them – could unlock enormous GDP growth, while those that chase short-term savings through automation risk dragging national output backwards.
The replacement of workers through offshoring and automation has a net negative impact on the Australian GDP, the report found, and policymakers are now at a “critical juncture”.
“Without proactive intervention, the societal costs of widespread AI-driven job displacement could outweigh the productivity gains,” one of the report’s authors, Chamara Somaratne, told Information Age.
“Our research suggests that investment in reskilling and upskilling initiatives is not just a social imperative but an economic necessity.
“To harness the full potential of AI, governments and industries must collaborate on developing robust policy frameworks that encourage innovation while ensuring an inclusive transition for the workforce.”
A trillion-dollar opportunity
The report looks at the broader impact of companies offshoring and automating work through AI, such as the workers who have been laid off taking lower-paid jobs and their spending ability.
It found that the impact on Australia’s GDP of automating and offshoring roles could be a cumulative net negative of $0.8 trillion over the next five years.
But if AI is used to augment and redesign work instead, it could have a cumulative net positive of $1.03 trillion over the same time period, the report found.
“Our macroeconomic modelling clearly indicates that while AI automation presents significant efficiency gains, the true long-term economic benefits and jobs growth are realised when AI is strategically implemented to augment human capabilities, rather than simply replace them,” Somaratne said.
“The report underscores that a balanced approach to AI adoption, one that prioritises augmentation, leads to a more resilient, productive and equitable economy.”
AI should be used to augment workers, not replace them, the report argues. Source: Shutterstock
The figures in the report are based on AI augmentation in the workplace leading to a 10 per cent increase in productivity and wage growth per annum.
It also assumes that 70 per cent of displaced workers would be re-employed in lower-wage roles, and the other 30 per cent would receive social welfare payments.
Augmentation vs automation
Several large companies have announced mass job cuts and an increased use of AI this year, including many Australian firms.
While companies doing this usually point to efficiency and economic gains associated with automation, its long-term impact on the GDP may be more negative, Somaratne said.
He said that if someone on a $180,000 annual salary in Australia loses their job due to AI automation, this will impact their ability to spend on goods and services, and to repay a potential mortgage.
“Imagine this happening to all non-customer-facing jobs, which make up about 15 to 20 per cent of all employment and contribute to roughly 20 to 25 per cent of our GDP,” Somaratne said.
“This is the impact of offshoring and automating.”
But if this role is augmented with AI instead, this could allow them to do the same work in a fifth of the time and then use the extra time to drive innovation, he said.
“Imagine the impact: if these jobs are offshored or automated, someone offshore or a software vendor is now doing this work at 20 per cent the cost, while still charging us the same,” Somaratne said.
“How does that impact their top line, and how does it reflect on our bottom line?”
What governments need to do
Somaratne said that governments need to step in and take measures to prevent this and the potential negative economic impact from happening.
“The analysis highlights a critical juncture for policymakers: without proactive intervention, the societal costs of widespread AI-driven job displacement could outweigh the productivity gains,” he said.
“Our research suggests that investment in reskilling and upskilling initiatives is not just a social imperative but an economic necessity.”
The report recommends wage subsidies for eligible roles, training grants focused on AI and targeted migration to help encourage companies to augment with AI rather than to automate.
Earlier this month tech behemoth Amazon announced it would be laying off 14,000 staff as it doubled down on AI.
This came just months after its CEO Andy Jassy said he expects the company’s workforce to reduce in “the next few years” due to “efficiency gains from using AI”.
