China’s economy met the government’s official growth target in 2025, with official figures showing real gross domestic product (GDP) expanded by 5%.

Exports played an outsized role in delivering this headline growth. Despite a simmering trade war with the United States, China finished up the year with a record-breaking trade surplus of US$1.2 trillion as it lifted exports to new markets in the rest of the world.

Yet behind these headline figures, China’s economy continues to face some stubborn headwinds. Consumer spending remains subdued. Exports – while strong – face mounting global uncertainty. And government expenditure is constrained by public sector debt pressures.

Adding to this, China’s population continued to shrink for the fourth straight year in 2025 as the birth rate reached a record low, reinforcing concerns an ageing population will hold back the economy in coming years.

A shrinking population isn’t necessarily incompatible with rising living standards. What matters is whether productivity growth can compensate for a smaller workforce.

For China, that means domestic investment, rather than consumption or expansionary government spending, is likely to be the key mechanism for sustaining growth.

Problems at home

Recent data suggest China’s weak household consumption is not merely a temporary, post-pandemic phenomenon but instead reflects deeper structural factors.

While China’s GDP growth reached its annual target in 2025, retail sales grew by only 0.9% year-on-year in December, the slowest pace since late 2022.

This highlights the fragility of consumer demand, despite policy measures aimed at supporting spending.

Although the services sector continues to expand and accounts for more than half of GDP, household consumption as a share of the economy remains low by international standards.

High savings rates, lingering uncertainty linked to the property downturn, and concerns about job and income security continue to weigh on spending decisions.

This is consistent with long-running trends identified in academic research. Policies to stimulate consumption can boost spending in the short term, but they have not fundamentally altered households’ preferences to save rather than spend.

Strong exports

Manufacturing output remained resilient, and net exports contributed significantly to overall expansion. This helped offset weak domestic demand.

China’s exports to the US did fall in 2025. But a shift to new markets in Southeast Asia, South America, Europe and Africa more than offset this decline.

However, China’s reliance on net exports as a source of growth is vulnerable. While exports contributed unusually heavily to growth in 2025, this pattern may be difficult to repeat amid protectionist pressures and potential tariff escalations.

Constraints on government spending

In theory, government spending could step in to stabilise demand. Right now, that’s difficult in practice.

Local governments face high debt burdens, falling revenues from land sales and rising pressures related to social programs and maintaining infrastructure.

This limits their capacity for large-scale government spending without making financial risks worse.

Despite this, China continues to generate very high national savings. In 2024, China’s national savings reached 43.4% of GDP. Meanwhile, consumption as a share of GDP – the reverse side of the savings rate – remained around 20 percentage points below the global average.

Turning savings into investment

If a country’s savings are not absorbed domestically through productive investment, they end up fuelling a current account surplus. This can expose an economy to tensions with trading partners.

In 2025, investment in fixed assets (long-term investments such as buildings and equipment) fell 3.8%, with property investment plunging by about 17%.

This signals both the scale of the investment decline in the real estate sector and the need to pivot investment toward higher-returning sectors, such as manufacturing, services and technology.

In the long run, channelling China’s high national savings into efficient domestic investment could have greater impact than government stimulus measures. That’s as long as capital is allocated to productive firms and sectors rather than bridges to nowhere.

A shrinking population

China’s shrinking population adds a further important dimension to this challenge. Population contraction is not necessarily incompatible with rising living standards.

But it creates a need to boost productivity, through technological progress, innovation and upskilling the labour force.

Official statistics already show technology-intensive services and high-value manufacturing segments are expanding faster than the rest of the economy.

China’s 2025 growth outcome masks a set of enduring structural realities. Consumer spending is likely to remain subdued, exports face increasing global uncertainty, and fiscal policy is constrained by debt burdens.

The key policy challenge, therefore, is not to reverse demographic trends at any cost. It is to accelerate the transition toward a more productive, capital- and knowledge-intensive growth model.

Yixiao Zhou, Associate Professor in Economics and Director of China Economy Program, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

When Optus, Medibank and non-bank lender Latitude Financial were hit by separate cyber attacks in the past few years, millions of Australians felt the fallout: stolen personal data, disrupted services and weeks of uncertainty. Each breach raised the same uncomfortable question: how can this keep happening?

Australians are often told cybercrime is unavoidable. Companies store vast amounts of data. Systems are complex. Attackers are sophisticated. Breaches feel like a matter of “when”, not “if”.

As a result, responses tend to focus on technology: firewalls, encryption, software updates and staff training. These are all important. But cyber risk is not just a technical problem. It is also a governance problem.

Our research suggests a quieter line of defence against attacks is already embedded inside many companies, albeit one many people rarely think about: auditors – a specialised type of financial accountant.

We found auditors who have previously worked with a company that suffered a cyber breach become far more vigilant across all their other clients. That experience changes how closely they question systems, controls and risk – even at companies that have never been hacked.

Asking the tough questions

Behind every system in a company sits a set of decisions: who is responsible, how risks are monitored, whether warnings are acted on and whether controls work in practice. This is where auditors come in.

Auditors are independent professionals who examine whether a company’s financial reporting systems and internal controls are working as they should. Internal controls are the checks and processes that help prevent errors, fraud or system failures.

Auditors do not write code or manage servers. But they ask hard questions about how systems are designed, who oversees them and whether management understands the risks.

As companies have become more digital, financial systems and IT systems have become deeply intertwined. A failure in one can quickly affect the other.

What we did and what we found

Our research examined more than 2,800 companies in the United States over a 16-year period. We tracked what happened after an auditor’s client suffered a cyber breach – and how that experience affected the auditor’s work with other clients.

The pattern was clear. Auditors who had dealt with a breached client became tougher elsewhere. We found they were 21% more likely to identify serious weaknesses in systems and controls at their other clients.

These were not random or defensive decisions. The weaknesses were often linked to technology oversight and access controls, areas closely tied to cyber risk.

Just as importantly, when these auditors issued a clean bill of health – meaning they did not identify major control problems – those companies were less likely to suffer a cyber breach later. Their clean assessments were more reliable.

A tougher mindset

We also interviewed auditors who had worked with breached clients. Their responses revealed a shift in mindset. One told us:

In the past, whatever came from the system, we said, “it’s OK, because it’s from the system”. Now we always ask: “is this really accurate?”

Others described spending more time testing controls, questioning management assumptions and involving IT specialists earlier. Living through a breach made risks tangible rather than abstract.

As one interviewee put it, breach experience becomes something that “can be brought across different clients”.

Lessons for Australia

Although our study uses US data, the implications are highly relevant to Australia.

Australia has experienced some of the world’s most high-profile cyber breaches in recent years. Cybercrime is one of the fastest-growing threats to Australian businesses.

Regulators are responding. The Australian Securities and Investments Commission has warned boards that cyber resilience is now a core governance responsibility. The Australian Prudential Regulation Authority requires financial institutions to demonstrate strong information security practices.

There is another local reason this matters. Australia’s largest listed companies are audited largely by global firms such as PwC, Deloitte, EY and KPMG. These firms share methodologies and lessons across borders.

That means insights from overseas breaches can influence audit practice in Australia before the next crisis hits.

Another dimension of cyber risk

Auditors are not cybersecurity experts, and responsibility still lies with company management and boards.

But auditors bring scepticism, independence and a system-wide perspective that many organisations lack internally. Their work often happens quietly, long before consumers feel the impact of a breach.

For investors, there is also a signal. Companies audited by breach-experienced auditors, especially when those auditors give a clean assessment, are statistically less likely to be hacked later. Audit quality is another dimension of cyber risk.

As cyber threats escalate, the auditing profession may be forced to evolve further. For Australian companies, that evolution could be timely. With public trust fragile and regulatory scrutiny increasing, learning from past breaches, even those overseas, may help prevent the next major data breach headline at home.

Charlene Chen, Senior Lecturer in Accounting, Macquarie University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

When the United States recently escalated its confrontation with Venezuela – carrying out strikes in Caracas and capturing President Nicolás Maduro – the moves were framed as political intervention.

But the raid also reflected a deeper contest over oil and critical mineral supply chains.

For Washington, controlling energy and strategic materials is now inseparable from power projection. That same logic is increasingly being applied in our own backyard – the Pacific seabed – where new mining could target minerals vital for batteries, electronics, clean energy and the military industrial complex.

What is deep‑sea mining?

In the Pacific, most attention today is on nodules in the Clarion‑Clipperton Zone (CCZ), a vast area between Hawaii and Mexico. This zone is administered by the International Seabed Authority (ISA), an intergovernmental body responsible for safeguarding the deep sea.

Nodules, which appear like potato-sized rocks, are found scattered across seabed plains four to six kilometres beneath the surface. These nodules are rich in nickel, cobalt, copper and manganese – metals used in electric vehicle batteries, smartphones and wind turbines.

Mining them involves driving a robotic “vacuum” over the seabed, pumping nodules up a riser pipe to a ship, and shipping concentrates ashore for processing.

Nodules aren’t the only target. Companies also eye sulfide deposits at hydrothermal vents and cobalt‑rich crusts on underwater mountains.

Increasingly, seabed minerals have become geopolitically important – and for two key reasons.

First, the energy transition is driving up demand for nickel, cobalt and manganese, with agencies projecting at least a doubling over the next two decades. Second, supply chains are concentrated in a handful of countries, making democracies nervous about choke points.

Policymakers and firms therefore see seabed minerals as a hedge: a way to diversify sources of “critical minerals” for clean energy and military defence.

Where mining meets fishing

Spanning 1.7 million square miles in international waters, the CCZ is earmarked for mining by 17 contractors under ISA licences.

At the same time, climate-driven shifts are drawing key tuna species – bigeye, skipjack and yellowfin – into the CCZ. Models suggest biomass increases of 10% to 30% for these species under warming scenarios. The result? Tuna fisheries and mining operations are set to share the same patch of ocean.

Mining plumes – clouds of sediment and metals stirred up at the seabed and discharged at the surface – could spread tens to hundreds of kilometres horizontally and hundreds of metres vertically.

For tuna and their plankton prey, the risks include stress on gills, disrupted feeding cues, and exposure to contaminants. Mid-water food webs could be hit hard: studies suggest over half of zooplankton and micronekton could be affected, rippling up to tuna stocks.

For Pacific economies reliant on tuna, this overlap represents a looming collision of industries. These tensions are already playing out in parts of the Pacific, including on New Zealand’s doorstep.

In 2025, the Cook Islands – a self-governing nation in free association with New Zealand – signed strategic agreements with both China and the United States: the former through a “Blue Partnership” for seabed mineral research and grants, and the latter via a joint commitment to science-led, responsible development.

This underscores how great-power competition is now converging on Pacific seabed resources.

In the same year, the US Department of the Interior began exploring deep-sea mineral leasing in federal waters near American Samoa. Local leaders flagged risks to tuna fisheries and culture, urging extended consultations.

The process remains exploratory, but it shows how seabed plans can collide with livelihoods even before a single robot touches the seafloor.

There are still plenty of unknowns about the environmental impacts.But we know mining removes life-bearing sediment and nodules and that sediment plumes can travel kilometres beyond the site. Decades-old disturbance tracks still show reduced biodiversity.

A 2024 study warned that plumes could mobilise metals into mid-water habitats, threatening marine life we barely understand. Recovery could take centuries – if it happens at all.

Why Pacific-led governance matters

The ISA has approved exploration but not exploitation; negotiations keep stalling amid calls, led by Pacific nations, for a moratorium or precautionary pause until science catches up.

Meanwhile, Pacific states are ratifying the High Seas Treaty, which will enable marine protected areas and require environmental impact assessments – tools to safeguard biodiversity and equity.

Sovereignty here isn’t abstract. In the Cook Islands, it means deciding if and when mining happens after community debate and science. In American Samoa, it means ensuring federal processes don’t undermine tuna-based livelihoods.

In a regional sense, it means Pacific voices shaping global decisions, rather than having rules imposed from afar.

Ultimately, the stakes are simple: risk a barely understood ecosystem to supply battery metals and military defence applications, or build the transition around circular materials, stronger land-based standards and robust ocean protections.

Pacific-led governance – grounded in science, culture and consent – is the best chance the world has to make sure decisions about the deep sea benefit people and nature, not just the next commodity cycle.

Viliame Kasanawaqa, Doctoral Researcher, Macmillan Brown Centre for Pacific Studies, University of Canterbury

This article is republished from The Conversation under a Creative Commons license. Read the original article.

An Artificial Intelligence bus is hurtling down our information superhighway and employees will be the casualties.

There’s an Artificial Intelligence bus hurtling down our information superhighway and employees are being thrown under that people transporter. And those on board are shareholders invested in companies smart enough to be embracing this rapidly moving technology.

This has to be the only sensible conclusion after reading the conclusions of the PwC Global Survey that also heralded a pretty positive view from local CEOs on the important driver of share prices — profit!

Because economics can be a zero sum game, where winners gain at the expense of others, the outlook for workers generally isn’t as rosy, as they have a rival in town that’s on a growth spurt. I            t’s called AI. Interestingly, it comes as the work-from-home trend has become increasingly entrenched, with the Victorian Government proposing this year to mandate in law the right for many workers to have two days working from home in their engagement agreements.

Only yesterday I wrote a piece for The Switzer Report under the headline: “Is CSL a dud or deliverer?” Significantly, chairman Brian McNamee cited the work-from-home trend as a negative for the productivity coming out of the company’s research labs. By the way, the work coming out of those labs has explained why CSL until recently was seen as the best company in this country.

This chart below shows its spectacular growth and recent fall from grace. While all this fall hasn’t been because of workers enjoying employment from home, it is seen as a notable factor.

CSL

So, what did the PwC survey of CEO’s tell us? Check these observations out:

1. 90% of local CEOs were “moderately” or “extremely confident” of growth.
2. It was 73% for global CEOs.
3. 32% of local bosses said they’d reduce mid-career headcounts by 1929.
4. It was a 25% reduction for CEOs elsewhere.
5. For both groups, 50% of CEOs saw junior jobs shrinking.
6. AI isn’t set to over-threaten senior jobs, with the job losses expected to be around 11%.
7. Despite the big plans based on investing in AI, only 14% of CEOs say their company has generated profits because of the new technology, which was about half of what global CEOs were reporting.

On what workers should be training for, clearly it’s to be skilled with AI. Local CEOs can see a 28% uplift in demand for those with AI mastery. However, this is lower than overseas, where CEOs there see a 42% increase in their hiring of AI-enhanced employees.

The AFR’s Rachel Bolton interviewed Kyle Daigle, chief operating officer and interim CEO at AI tech giant GitHub, who looked at the job threat with AI. “I joke that AI isn’t going to take your job – but your intern might. Honestly though, breakthroughs don’t happen when one generation replaces another. This new generation will have the ‘how’, but not yet the ‘why’ or the ‘where’. That comes from decades of institutional knowledge held by today’s mid-career professionals.”

The threat to jobs could be slower than CEOs think, which means the AI bus might have a speed limit on it. But it’s coming and inflexible old-world workers should look out for big, faster moving vehicles!

This is bad news for workers but good news for shareholders down the track.

Anyone sweating on no interest rate rises this year and praying for a cut shouldn’t give up hope. This is despite too many economists and newspaper headlines tipping rate rises are coming. And the consensus among the rate rise crew is two this year. But will they be right?

Economists are trained to forecast where the economy and important indicators (such as inflation, unemployment, interest rates, the dollar and so on) are going. However, because people and the economies they create are so complex, there’s still a lot of guessing when it comes to the predictions of economists.

However, what helps economists ‘guess’ better is critically important economic data. Between this week and next Wednesday, we should get the news that will break mortgage holders hearts or get them breathing a sigh of relief.
Of course, there’s a lot of economic news between now and February 3 when the RBA makes its first interest rate decision for 2026 but let me give you the dates and data drops that will make or break borrowers hearts and hopes. Here they are:

1. This Thursday (January 22) we see the latest unemployment number. If it’s a strong/good number it will encourage an RBA rate rise. A weak number helps keep rates on hold. A shock jump in the jobless figure would put rate cuts back on the table, but this is not expected.
2. On the following Wednesday (January 28), we see the December quarter Consumer Price Index. This has to deliver surprisingly good inflation readings for the RBA to stop hinting about the need to raise rates.
3. Other economic data will be looked at, such as last week’s consumer sentiment reading, which wasn’t good and coincided with talk about rate rises. But in the minds of RBA board members who decide on rate changes, unemployment and inflation are the main games in town.

Early in January I looked at the survey from the AFR’s Cecile LeFort, and this is what I deduced from the 38 economists’ predictions:
1. The CBA and NAB economics teams expect a rate rise next month, taking the cash rate from 3.6% to 3.85%.
2. 17 out of the 38 economists surveyed tip at least two hikes this year!
3. However, 16 out of this group see (wait for it) no changes in rates this year.
4. And it gets better for those praying for a cut. Nine economists see the cash rate below the current 3.6% by year’s end!
5. So, adding the ‘no change’ economists to the ‘rate cut’ economists, we now have 25 out of 38 economists not thinking that we’ll see a rate rise this year!
6. But wait, there’s more, with four economists seeing at least two cuts this year, with Yarra Capital Tim Toohey telling us that the cash rate might be 2.85% by Christmas this year!

As you can see, despite headlines and noisy economists in the news, interest rate rises are no certainty in 2026. The RBA doesn’t want to raise interest rates, but it will if the labour market looks strong and inflation isn’t falling. And that’s why data drops for these two economic indicators are the big watches for the next two weeks.

By the way, lower inflation that might stop rate rises and put rate cut speculation back in the news would be great for the stock market, which has underperformed many of the big global share markets. If this happened, it would be great for our super returns.

 

This week, investors will focus on key inflation prints, construction activity and central bank updates, with Australia’s labour market data and the US core PCE deflator both likely to guide expectations for rate moves in early 2026. China’s latest GDP and retail figures will also help assess the world’s second-largest economy heading into the new year.

Monday January 19

Melbourne Institute inflation gauge (December)
Headline inflation could lift 0.2%, providing an early read on price pressures.

China economic growth (GDP, December quarter)
Annual GDP growth of 4.9% is expected.

China retail sales, production & investment (December)
Retail sales could lift 0.9% year-on-year.

US financial markets
Closed for Martin Luther King Jr. Day.

Tuesday January 20

China loan prime rates (LPRs)
No change in the benchmark lending rates is expected.

Wednesday January 21

Building activity (September quarter)
Focus remains on residential construction starts.

Engineering construction activity (September quarter)
Value of work done is the highest in 17½ years.

US construction spending (October)
Tipped to edge up 0.1% as activity normalises.

US pending home sales (December)
Sales could lift 1.4% as buyers respond to softer mortgage rates.

US Conference Board leading index (December)
The index dipped 0.3% in November, reflecting slower momentum.

Thursday January 22

Labour force (December)
Around 35,000 jobs could be created, keeping unemployment stable.

US economic growth (GDP, September quarter)
Annualised GDP growth of 4.3% is expected.

US personal income & spending (November)
Income could lift 0.4%, with spending up 0.5%.

US core PCE price index (November)
Tipped to increase 2.8% year-on-year — the Fed’s preferred inflation measure.

US Kansas City Fed manufacturing index (January)
Factory activity expected to lift from -5 to -3.

Friday January 23

S&P Global Australia purchasing managers’ index (January)
Composite PMI could lift from 50.1 to 51.3 — a sign of modest expansion.

New Zealand consumer price index (December quarter)
Annual CPI could rise to 3.1% from 3.0%.

Bank of Japan (BOJ) interest rate decision
Policy rate is expected to be held at 0.75% — a 30-year high.

US S&P Global PMIs (January)
Services PMI tipped to rise to 52.8 from 52.5.

Key themes to watch

• Jobs & wages: Australia’s labour force report will shape expectations for RBA policy in February.
• Global growth: China and US GDP prints could reinforce hopes for a soft landing.
• Inflation path: US core PCE and NZ CPI will be closely watched for signs of easing price pressures.
• Construction strength: Record-high engineering activity points to continued pipeline momentum in Australia.

Check back next week for the latest investor calendar — only on Switzer.

Central bankers from around the world have issued a joint statement of support for US Federal Reserve Chair Jerome Powell, as he faces a criminal probe on top of mounting pressure from US President Donald Trump to resign early.

It is very unusual for the world’s central bank governors to issue such a statement. But these are very unusual times.

The reason so many senior central bankers – from Australia, Brazil, Canada, Europe, New Zealand, South Africa, South Korea, the United Kingdom and other countries, as well as the central banks’ club the Bank for International Settlements – have spoken up is simple. US interest rate decisions have an impact around the world. They don’t want a dangerous precedent set.

Over the course of my career as an economist, much of it at the Reserve Bank of Australia and the Bank for International Settlements, I have seen independent central banks become the global norm in recent decades.

Allowing central banks to set interest rates to achieve inflation targets has avoided a repeat of the sustained high inflation which broke out in the 1970s.

Returning the setting of monetary policy to a politician, especially one as unpredictable as Trump, is an unwelcome prospect.

What’s happened

Trump has repeatedly attacked the US Federal Reserve (known as the Fed) over many years. He has expressed his desire to remove Powell before his term as chair runs out in May. But legislation says the president can only fire the Fed chair “for cause”, not on a whim. This is generally taken to mean some illegal act.

The Supreme Court is currently hearing a case about whether the president has the power to remove another Fed board member, Lisa Cook.

And this week, Powell revealed he had been served with a subpoena by the US Department of Justice, threatening a criminal indictment relating to his testimony to the Senate banking committee about the US$2.5 billion renovations to the Fed’s historic office buildings.

Trump has denied any involvement in the investigation.

But Powell released a strong statement in defence of himself. He said the reference to the building works was a “pretext” and that the real issue was:

whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether monetary policy will be directed by political pressure or intimidation.

On Tuesday, more than a dozen of the world’s leading central bankers put out a statement of support:

We stand in full solidarity with the Federal Reserve System and its Chair Jerome H Powell. The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.

Another statement of support came from leading US economists – including all the living past chairs of the Fed. This included the legendary central bank “maestro” Alan Greenspan, appointed by Ronald Reagan and reappointed by George HW Bush, Bill Clinton and George W Bush.

This statement warned undermining the independence of the Fed could have “highly negative consequences” for inflation and the functioning of the economy.

Why it matters for global inflation

Trump has said he wants the Fed to lower interest rates dramatically, from the current target range of 3.5–3.75% down to 1%. Most economists think this would lead to a large increase in inflation.

At 2.8% in the US, inflation is already above the Fed’s 2% target. The Fed’s interest rate would normally only drop to 1% during a serious recession.

A clear example of the dangers of politicised central banks was when the Fed lowered interest rates before the 1972 presidential election. Many commentators attribute this to pressure from then president Richard Nixon to improve his chances of re-election. This easing of monetary policy contributed to the high inflation of the mid-1970s.

A more recent example comes from Turkey. In the early 2020s, President Recep Tayyip Erdoğan leaned on the country’s central bank to cut interest rates. The result was very high inflation, eventually followed by very high interest rates to try to get inflation back under control.

Trump should be careful what he wishes for

What will happen if Trump is able to appoint a compliant Fed chair, and other board members, and if they actually lower the short-term interest rates they control to 1%? Expected inflation and then actual inflation would rise.

This would lead to higher long-term interest rates.

If Trump gets his way, US voters may face a greater affordability problem in the run-up to the mid-term elections in November. This could then be followed by a recession, as interest rates need to rise markedly to get inflation back down.

And as over a dozen global central bank leaders have just warned us, what happens in the US matters worldwide.

John Hawkins, Head, Canberra School of Government, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

<p>Cut the words “please” and “thank you” from your next ChatGPT query and, if you believe <a href="https://shivammore.medium.com/your-politeness-to-ai-costing-millions-and-harming-the-environment-8e5bee3e7874">some of the talk online</a>, you might think you are helping save the planet.</p>

<p>The idea sounds plausible because AI systems process text incrementally: longer prompts require slightly more computation and therefore use more energy. OpenAI’s chief executive Sam Altman <a href="https://x.com/sama/status/1912646035979239430">has acknowledged</a> it all adds to operating costs at the scale of billions of prompts.</p>

<p>At the same time, it is a stretch to suggest that treating ChatGPT politely comes at significant environmental cost. The effect of a few extra words is negligible compared with the energy required to operate the underlying data centre infrastructure.</p>

<p>What is more important, perhaps, is the persistence of the idea. It suggests that many people already sense AI is not as immaterial as it appears. That instinct is worth taking seriously.</p>

<p>Artificial intelligence depends on large data centres built around high-density computing infrastructure. These facilities draw substantial electricity, require continuous cooling, and are embedded in wider systems of energy supply, water and land use.</p>

<p>As AI use expands, so does this underlying footprint. The environmental question, then, is not how individual prompts are phrased, but how frequently and intensively these systems are used.</p>

<h2>Why every AI query carries an energy cost</h2>

<p>One structural difference between AI and most familiar digital services helps explain why this matters.</p>

<p>When a document is opened or a stored video is streamed, the main energy cost has already been incurred. The system is largely retrieving existing data.</p>

<p>By contrast, each time an AI model is queried it must perform a fresh computation to generate a response. In technical terms, each prompt triggers a fresh “<a href="https://www.ibm.com/think/topics/ai-inference">inference</a>” – a full computational pass through the model – and that energy cost is incurred every time.</p>

<p>This is why AI behaves less like conventional software and more like infrastructure. Use translates directly into energy demand.</p>

<p>The scale of that demand is no longer marginal. <a href="https://www.science.org/doi/10.1126/science.aba3758">Research published in the journal Science</a> estimates that data centres already account for a significant share of global electricity consumption, with demand rising rapidly as AI workloads grow.</p>

<p>The <a href="https://www.iea.org/reports/electricity-2024">International Energy Agency has warned</a> that electricity demand from data centres could double by the end of the decade under current growth trajectories.</p>

<p>Electricity is only one part of the picture. Data centres also require large volumes of water for cooling, and their construction and operation involve land, materials and long-lived assets. These impacts are experienced locally, even when the services provided are global.</p>

<h2>AI’s hidden environmental footprint</h2>

<p>New Zealand offers a clear illustration. Its high share of renewable electricity makes it attractive to data centre operators, but this does not make new demand impact-free.</p>

<p>Large data centres can place <a href="https://www.rnz.co.nz/news/national/528846/energy-hungry-data-centres-want-nz-s-renewable-electricity-to-reduce-climate-impact">significant pressure on local grids</a> and claims of renewable supply do not always correspond to new generation being added. Electricity used to run servers is electricity not available for other uses, particularly in dry years when hydro generation is constrained.</p>

<p>Viewed through a systems lens, AI introduces a new metabolic load into regions already under strain from climate change, population growth and competing resource demands. </p>

<p>Energy, water, land and infrastructure are tightly coupled. Changes in one part of the system propagate through the rest.</p>

<p>This matters for climate adaptation and long-term planning. Much adaptation work focuses on land and infrastructure: managing flood risk, protecting water quality, maintaining reliable energy supply and designing resilient settlements.</p>

<p>Yet AI infrastructure is often planned and assessed separately, as if it were merely a digital service rather than a persistent physical presence with ongoing resource demands.</p>

<h2>Why the myth matters</h2>

<p>From a systems perspective, new pressures do not simply accumulate. They can drive reorganisation.</p>

<p>In some cases, that reorganisation produces more coherent and resilient arrangements; in others, it amplifies existing vulnerabilities. Which outcome prevails depends largely on whether the pressure is recognised early and incorporated into system design or allowed to build unchecked.</p>

<p>This is where discussion of AI’s environmental footprint needs to mature. Focusing on small behavioural tweaks, such as how prompts are phrased, distracts from the real structural issues.</p>

<p>The more consequential questions concern how AI infrastructure is integrated into energy planning, how its water use is managed, how its location interacts with land-use priorities, and how its demand competes with other social needs.</p>

<p>None of this implies that AI should be rejected. AI already delivers value across research, health, logistics and many other domains.</p>

<p>But, like any infrastructure, it carries costs as well as benefits. Treating AI as immaterial software obscures those costs. Treating it as part of the physical systems we already manage brings them into view.</p>

<p>The popularity of the “please” myth is therefore less a mistake than a signal. People sense AI has a footprint, even if the language to describe it is still emerging.</p>

<p>Taking that signal seriously opens the door to a more grounded conversation about how AI fits into landscapes, energy systems and societies already navigating the limits of adaptation.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img src="https://counter.theconversation.com/content/272258/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important" referrerpolicy="no-referrer-when-downgrade" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p>

<p><span><a href="https://theconversation.com/profiles/richard-morris-2547152">Richard Morris</a>, Postdoctoral Fellow, Faculty of Agriculture and Life Sciences, <em><a href="https://theconversation.com/institutions/lincoln-university-new-zealand-804">Lincoln University, New Zealand</a></em></span></p>

<p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/does-adding-please-and-thank-you-to-your-chatgpt-prompts-really-waste-energy-272258">original article</a>.</p>
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