Microsoft executive points to 'institutional inertia' for lagging productivity despite AI adoption
An executive at Microsoft has blamed Australian employers' hesitation in taking risks as a reason why productivity remains lagging despite widespread adoption of artificial intelligence, according to reports.
Charles Lamanna, Microsoft's executive vice president for Copilot, also attributed the lagging productivity to "institutional inertia," The Australian reported.
"I see … companies kind of being a little bit hesitant to take some risk with AI because I think anyone that says like 'AI is perfect and AI doesn't make mistakes and you know there's no risk,' they're not actually being realistic because any technology comes with risk," Lamanna said as quoted by the news outlet.
"A person doing a job comes with risk. The best companies are making a risk-reward trade-off calculation, knowing here's a place where I can take risk."
Lagging Australian productivity
Lamanna's remarks come as Australia's productivity lags despite widespread AI adoption.
According to The Australian's report, 18 of ASX 20 firms and 66 federal government agencies are implementing Microsoft's Copilot. More than 10,000 employees have also received the technology.
And yet, Australia's multifactor productivity (MFP), which measures how well labour and capital combine to produce outputs, declined over the 12 months to June 2025.
"MFP decreased by 0.5% over 2024-25, below the 20-year average of 0.4% growth per year and well below the [average] of 1.6% annual average increases between 1994-95 to 2003-04," said Alex Robson, the deputy chair of the Productivity Commission (PC), in its Annual Productivity Bulletin 2026.
The PC previously forecasted that AI will be part of the solution to Australia's stagnating productivity. It estimated that productivity gains from AI will be above 2.3% in the next decade, with labour productivity growth predicted at 4.3%.
Lamanna's remarks add to the growing list of reasons that executives have been citing as a factor why productivity has not been moving forward.
Lou Compagnone, director of artificial intelligence at technology services firm Datacom, blamed the scattered adoption of AI tools without actual achievement.
Dom Price, formerly a futurist at Atlassian, blamed it on AI being treated like just another "transformation" without transforming, where the technology amplified bad corporate habits, The Australian reported.
AI to boost productivity
The Australian government is already being urged to utilise its upcoming Office of AI to boost the country's productivity.
"The need now is for the government to make quick and clear decisions about its appetite to embrace the possibilities that are before the economy and communities," said Innes Willox, chief executive of the national employer association, Australian Industry Group.
"Over-regulation would only diminish Australia's competitiveness, productivity, and comparative advantages at a time of significant opportunity to drive growth and improve living standards."
The Australian government recently received a $25-billion investment from Microsoft to boost its AI infrastructure, cyber defence, and skills programmes to the end of 2029.
Part of the investment is a pledge to train three million Australians in workforce-ready AI skills by 2028.
"Australia has an enormous opportunity to translate AI into real economic growth and societal benefit," said Microsoft chairman and chief executive Satya Nadella earlier this year.
"That is why we are making our largest investment in Australia to date, committing $25 billion to expand AI and cloud capacity, strengthen cybersecurity, and expand access to digital skills across the country."
