A survey of more than 1000 people by consumer group Choice found fewer than one in 10 people found AI made products and services better.
As more companies and retail giants use AI chatbots for customer service, the survey found just over half of respondents thought the technology had made their experiences worse.
Choice senior campaigns and policy advisor Jordan Cornelius said the survey showed many people remained deeply sceptical about the technology.
"AI could result in one of the biggest shifts in power away from consumers we've seen," she said.
"AI has the potential to erode our ability to assess value or shop around, through highly individualised surveillance pricing, dark patterns and poor customer service experience."
The report also found that just under half of those surveyed thought the increasing use of AI was making the prevalence of scams worse.
Seventy per cent said businesses should not be trusted to use AI as they thought best.
AI had the ability to supercharge scams in a variety of ways, Ms Cornelius said.
"In the hands of scammers, AI has been used to generate deepfake videos, synthetic voice clones and scam advertisements to lure people in so scammers can steal their money," she said.
"We're already seeing the disastrous impacts AI can have on consumers, and without safeguards, this is likely to worsen."
The federal government is seeking to introduce standards for AI companies in Australia.
Choice called for protections for consumers, including a ban on businesses using personal information to set individualised prices for customers, as well as boosting privacy measures.
Services used by businesses that incorporate AI, such as chatbots and online marketplaces, should also be woven into existing scam prevention measures, the group said.
"Without new, stronger laws, Australia's consumer protection framework will simply not be able to keep pace with the significant harms associated with AI," Ms Cornelius said.
