The Australian finance industry is poised to deliver up to $A60 billion in economic growth by 2035 through the adoption of generative artificial intelligence, according to a new report that warns against heavy-handed government regulation of the emerging technology.

The Australian Finance Industry Association (AFIA) released research showing that AI adoption across the finance sector is expected to double within three years, driving significant productivity gains and improving customer experiences through streamlined operations and automated processes.

The report, conducted by King & Wood Mallesons and Sapere, presents two scenarios for AI adoption. In a conservative uptake scenario, generative AI could add $A37.2 billion to Australian GDP by 2035. Under high adoption rates, the economic benefit jumps to $A59.5 billion.

AFIA Chief Executive Diane Tate said the findings demonstrate AI's transformative potential for Australia's financial services sector, which has been using narrow AI applications for decades but is now embracing more sophisticated generative AI capabilities.

"AI has the power to significantly enhance the Australian finance industry, driving efficiency, better experiences for customers and giving local finance firms a competitive edge globally," Tate said.

The technology is expected to revolutionise operations including document processing, personalised customer communications, information analysis, and quality assurance processes. Financial institutions surveyed for the research included major banks, finance companies, fintech startups, vehicle and equipment finance providers, and fleet operators.

However, AFIA is urging policymakers to avoid "blanket regulatory approaches" that could stifle innovation and investment in AI technologies. The association argues that premature or overly restrictive regulation could undermine the productivity gains needed to boost Australia's economic growth and global competitiveness.

"Heavy-handed or premature regulation will stifle efficiency, deter investment, put a handbrake on growth and productivity, and undermine our global competitiveness," Tate warned.

The report emphasises that the finance industry already operates under extensive regulation, with existing laws and standards applying to AI deployment. Rather than imposing new blanket regulations, AFIA recommends that any AI regulation should address specific gaps in current legislation.

The economic benefits are expected to flow beyond the finance sector into government, trade, business services, and manufacturing industries. Companies that become "AI leaders" by investing early in generative AI opportunities are projected to capture the majority of productivity savings and gain competitive advantages.

AFIA is calling for government and regulators to partner with industry to develop practical, adaptive frameworks that support responsible AI use while preserving economic and operational benefits. The association points to its track record of successful collaboration with policymakers on financial regulation as evidence of its ability to help shape appropriate AI governance.

The research comes as governments worldwide grapple with how to regulate AI technologies while maintaining innovation and economic growth. Australia's approach to AI regulation will likely influence the finance industry's ability to realise the projected economic benefits over the next decade.

A copy of the report can be downloaded here.