While the rapid rise of artificial intelligence sparks fears of displacement, its potential as a general purpose technology offers a path to revitalized productivity and higher living standards.
A Legacy 75 Years in the Making
Artificial intelligence often feels like a sudden disruption, a modern phenomenon that appeared overnight with the launch of sophisticated large language models. However, the core technology has been percolating for roughly 75 years, dating back to the foundational work of Alan Turing. What has changed recently is not the existence of the idea, but its power and accessibility. We have moved from theoretical research into a phase of rapid commercialization and adoption that has the potential to permanently alter the Canadian economic landscape.
The Bank of Canada views AI through the lens of its mandate: inflation, employment, and financial stability. Because AI can lower business costs and improve efficiency, it has the potential to support higher wages and reduce price pressures for consumers. However, this transition also introduces new risks, including the potential for market overvaluation in AI-focused equities and the rise of more sophisticated cyber threats. Understanding whether AI is a fleeting trend or a structural shift is essential for modern monetary policy.
The Anatomy of a General Purpose Technology
To understand AI's potential, we must compare it to what economists call General Purpose Technologies (GPTs). These are rare, transformative innovations—like the steam engine, electricity, and the internet—that share specific characteristics. They start from a single technological core, evolve to be used across the entire economy, and generate significant 'spillovers.' Just as the computer was a spillover of electricity, AI is a spillover of the computing revolution. It fundamentally changes how institutions operate and eventually necessitates new laws and social norms.
At this stage, AI possesses many, but not all, of the characteristics of a GPT. We are still in the early innings of adoption. If AI remains a task-specific tool, its impact on productivity will be modest. But if it follows the path of the internet, it will continue to improve, adoption will broaden, and it will eventually lead to massive productivity growth. This distinction is vital because a GPT-level shift would allow the economy to grow faster without generating inflationary pressures, effectively raising the ceiling on Canada’s potential output.
The Reality of Adoption in Canada
Current data suggests that AI adoption in Canada is gaining significant steam, though it remains uneven. In 2022, only about 3% of Canadian businesses utilized AI; by 2025, that figure had quadrupled to 12%. However, a digital divide is emerging between sectors. While over 30% of finance and insurance firms have integrated AI, less than 2% of businesses in the accommodation and food services sectors have done the same. Many firms cite a lack of internal skills or a mismatch between current tools and their specific needs as primary barriers to entry.
Despite these hurdles, the infrastructure for a broader rollout is being built at a staggering pace. Investment in AI data centers by top technology firms doubled between 2024 and 2025, reaching hundreds of billions of dollars. This massive build-out of capacity will eventually make advanced AI tools cheaper and easier for small and medium-sized Canadian enterprises to access. As hardware improves and models become more capable, we expect the concentration of AI use to spread from a few elite sectors to the broader economy.
Jobs, Tasks, and the Human Element
The most pressing concern for many Canadians is the future of work. History provides a reassuring, if complex, precedent. When computers entered the office, roles like switchboard operators vanished, but entire IT departments were born. So far, the evidence in Canada does not point to widespread worker displacement. A Statistics Canada study revealed that 90% of businesses adopting AI reported no change in staffing levels. Instead of replacing humans, AI is largely changing how tasks are performed, with humans remaining firmly in control of the decision-making process.
Early data from the Indeed Hiring Lab shows that AI is currently a time-saving tool rather than a job-killer. Over half of Canadians using AI at work report saving one to two hours a day, while nearly a quarter save three to five hours. Crucially, workers are not using this time to leave early; they are redirecting it toward higher-value projects, professional development, and improving the quality of their output. In the healthcare sector, for instance, AI is being used to handle routine paperwork, giving doctors and nurses more time for patient care rather than replacing the medical professionals themselves.
Navigating the Transition
While the long-term outlook is optimistic, the transition period will involve friction. We are already seeing signs of weak hiring in roles highly exposed to AI, such as entry-level coding and basic customer service. This could disproportionately affect younger workers entering the labor force. To mitigate this, there is an urgent need for skills training and educational alignment. The more workers are exposed to AI, the more they tend to view it as an opportunity creator rather than a threat. Building these competencies is essential for Canada to maintain its competitive edge.
The Bank of Canada is not just an observer of this trend; we are an active participant. We use machine learning to sharpen our inflation forecasts, track economic sentiment, and analyze vast datasets to understand household behavior. While AI does not make our monetary policy decisions, it provides the granular insights necessary to navigate an increasingly complex world. Our commitment remains to keep inflation low and stable at our 2% target, providing the predictable environment businesses need to invest in these transformative technologies with confidence.