Current generation of autopilots doesn't handle traffic avoidance or make any routing decisions - they just follow pre-programmed routes at pre-programmed speed and altitude (or climb/descent profile).
But even this relatively simple level of automation causes problems - pilots start to rely on automation too much, and when things go south they are not capable to deal with it.
Airlines recognize it, and put more emphasis on hand-flying during training and routine operations, so pilots don't lose their basic piloting skills.
This video also inspired an excellent podcast from 99 Percent Invisible about the challenges and dangers of automation. I would highly recommend listening.
