Australia is urged to hold off imposing guardrails on high-risk artificial intelligence as the technology could offer a solution to the nation’s withered productivity.

AI has been touted as a tool that could transform the global economy and is expected to add more than $116 billion to Australia’s economic activity over the next decade, according to the Productivity Commission’s interim report.

While the independent advisory body to the federal government acknowledged the risks that accompany AI, it also warns “poorly designed” regulation could stifle its adoption and development as well as limit its benefits, fuelling calls for the government to only introduce technology-specific regulations as a last resort.

“Adding economy-wide regulations that specifically target AI could see Australia fall behind the curve, limiting a potentially enormous growth opportunity,” Commissioner Stephen King said.

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“Like any new technology, AI comes with risks, but we can address many of these risks by refining and amending the rules and frameworks we already have in place.”

The federal government’s consultations on AI found Australia’s regulatory system was not fit to respond to the risks it posed, prompting the Commonwealth to seek responses on 10 proposed, mandatory guardrails for high-risk AI, which are aimed at reducing the likelihood of harms from its development and deployment.

AI can amplify biases, contribute to misinformation and disinformation, spread extremist content and create other new risks, the government’s report found.

Others have also raised concerns about the significant amount of water and energy needed to run generative AI.

But the Productivity Commission believes the suggested guardrails should only be applied when harms cannot be mitigated by existing regulatory frameworks or in cases where “technology-neutral” regulation is not possible.

Until the government has completed reviews into the gaps posed by AI to existing regulatory structures, “steps to mandate the guardrails should be paused”.

AI is expected to be a key concern at Treasurer Jim Chalmers’ economic roundtable on productivity, which convenes later in August.

“The impact of AI on our economy is uncertain, but there are good reasons to be optimistic,” he said.

“We can deploy artificial intelligence in a way consistent with our values if we treat it as an enabler not an enemy, by listening to and empowering workers to adapt and augment their work.”