In a brief handed to the treasurer, AI has been characterised as a tool which could provide significant productivity gains across the public and private sectors to the tune of 1.2 per cent a year by 2030.
It's a prediction made against the backdrop of declining labour productivity in recent years and anaemic GDP growth.
Productivity estimates vary wildly, with Treasury noting the significant uncertainty over the extent of positive impacts from AI which could take decades to materialise.
Treasury also flagged the capacity of AI to disrupt high-skilled, non-routine and cognitive jobs in a way never seen in previous technological advances.
Australia's prosperity depends on keeping pace with the global shift towards AI, according to the brief which underpins a large part of the artificial intelligence chapter in October's Intergenerational Report.
Treasurer Jim Chalmers acknowledged the significance of AI as the first substantive and credible productivity growth accelerant in almost 20 years.
"We can't just sit around and hope the benefits of AI fall into our lap – we have to reach out and take them," he said in a statement.
Data from the Reserve Bank in late 2025 suggested the take up of AI had been limited to one-in-10 businesses using it in a significant way, which Treasury said was likely to increase as ways to use AI developed over time.
Regulation and taxes are hampering business from seizing its share of the AI opportunity, the Australian Chamber of Commerce and Industry says.
Chief executive Andrew McKellar said expecting Australian businesses to compete globally on AI at the moment "does not compute".
"Australian businesses should not have to engage in this competition with one hand tied behind their backs," he said.
The world is in an AI arms race with traditional superpowers seeking to harness productivity growth, and in China's case, reshaping its economy entirely, former prime minister Kevin Rudd says.
Mr Rudd on Wednesday spoke of China hedging its bets on AI to not only increase stalling economic growth but to "leapfrog" western nations by doing away with the free market altogether.
The Treasury advice makes brief mention of possible concerns surrounding AI including the risk outputs remain more expensive to verify than generate and dwindling social licence to build data centres.
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