AI innovation must be national priority to secure Australia’s AI future

Artificial intelligence (AI) is a transformative asset for Australia. Surging investments and fierce competition demand stronger sovereign AI strategies — no country can afford to lag behind. To seize this generational opportunity, Australia must position itself as an AI leader, not a passive adopter. Its next moves will be critical in shaping the nation’s digital future and prosperity.

Over the next decade, AI will inject up to $142 billion into Australia’s economy, according to the recent Australia’s AI Opportunities report, presenting a staggering opportunity to drive economic growth and improve the lives of millions. While the opportunity has been recognised — with the Productivity Commission elevating AI and diverse energy sources as key pillars for productivity improvement — Australia must act faster. Australia’s Minister for Industry and Innovation and Minister for Science, Tim Ayres, has echoed this vision by urging governments and businesses to lean in and secure a stake in global AI development.

Truly ‘leaning in’ requires smart investment and strategic planning today to build a strong foundation for the future. This would require collaboration between the government and enterprises to invest in sustainable infrastructure, develop talent, expedite access to all forms of energy, and ultimately close governance gaps. It also means bringing Australians on the AI journey by building trust and demonstrating how AI can deliver tangible benefits in their daily lives. Make the right investments now, and Australia will set itself apart and shape the region’s AI future.

Establish Australia as an energy-efficient data centre hub

A clear path to differentiation is by becoming a hub for energy-efficient data centres. Rapid AI adoption is surging energy demands, creating a global challenge to scale efficiently. In the next two years, global AI-related power consumption could reach 23 GW, twice the total energy consumption of the Netherlands. In the next five years, Morgan Stanley predicts that data centres will account for about 8% of total Australian power consumption, up from the current 5%. Few countries are better placed than Australia to meet this imminent demand, with renewable energy sources supplying 35% of the country’s electricity in 2024. By leveraging its vast energy generation potential, Australia can not only support AI growth domestically but also set a benchmark for efficient operations across the region.

Power consumption is a major barrier to AI scalability, but smarter, more efficient data centres can help. Advanced technologies such as direct liquid cooling, waste heat recovery, and energy management tools, for example, are already driving efficiencies. Looking to the near future, agentic AI-powered platforms, that leverage digital twins (virtual replicas of physical systems) and more advanced automation tools, are already being tested to optimise computational workload scheduling. When combined with real-time energy grid data, enterprises may utilise these platforms to forecast and prioritise workloads based on business needs, energy availability and cost with remarkable precision.

With data centre electricity consumption expected to grow in the next five years, resilient grid infrastructure is critical. Investments in national transmission networks, AI-powered smart grids, and support for energy innovation will help streamline energy use, improve efficiency and increase energy supply resilience.

Build an AI-ready workforce

Beyond physical infrastructure, the AI talent shortage poses another significant barrier. Bain & Company estimates Australia will face a shortfall of up to 60,000 AI professionals by 2027. To succeed long-term, Australia must nurture AI specialists who can turn cutting-edge AI research into practical, industry-ready solutions. This investment in talent would create a wave of new roles for generations to come, from AI engineers to entirely new industries powered by AI innovation.

But bridging the talent gap isn’t just about training more specialists. It’s also about equipping the broader workforce to embrace AI tools. Jobs and Skills Australia’s recent report found that 13% of jobs could be automated by 2050, with more than half augmented by AI. As such, many workers hesitate to adopt AI, fearing job replacement or lacking confidence in their skills. The NSW government’s rollout of the EduChat AI tool in public schools is a positive step towards early AI literacy and confidence. Enterprises, as primary adopters, also have a responsibility to prepare their workforces for long-term AI transformation by providing accessible tools and practical training programs.

The government’s Data, Digital and Cyber Workforce Plan works in tandem with its National AI Capability Plan to complement these efforts. Continuing to drive forward a strategy that closes the gaps and integrates STEM initiatives, certification programs, and dedicated R&D funding through public-private partnerships would help the country work towards a comprehensive national AI talent plan. Only when enterprises and governments work together to educate the public about AI can its full productivity benefits be realised.

Evolve Australia’s agile and future-proof sovereign AI development framework

Australia must also evolve its governance framework to balance AI innovation and oversight. Despite growing concerns about stringent guardrails stifling innovation, research has revealed that 83% of business leaders view AI regulations as essential for maximising the technology’s potential. Appropriate, adaptive guardrails will instil stability and confidence while fostering sovereign AI innovation, striking a balance between responsible development and agile technological progress.

Instead of rigid technical rules, governance should emphasise real-world outcomes. Regulatory sandboxes, for example, can provide safe environments to experiment with emerging AI solutions, while open AI ecosystems through standards-based development practices can establish consistency and reliability.

Of the three main vehicles to approach sovereign AI — government-for-government (AI models built exclusively for government use), government-for-industry (national infrastructure serving both public and private sectors), and government-with-industry (collaborative co-design of AI strategies) — Australia can benefit most from the government-with-industry approach. At each level, clear policy and robust regulatory guidance frameworks are essential to build trustworthy, transparent and accountable sovereign AI systems.

Seizing Australia’s opportunity to lead

This is a defining moment for Australia to act and invest with an infrastructure-first approach. The government has a key role to play in driving innovation, expanding energy-efficient data infrastructure, and equipping its workforce with essential AI skills. Simultaneously, fostering a vibrant sovereign AI ecosystem demands decisive action from enterprises. This includes actively investing in digital infrastructure, prioritising employee training to build industry-wide capabilities and advocating for effective AI governance. Through public-private partnerships, where government and enterprises collaborate, Australia will set itself apart and become a leader, rather than a participant, in shaping AI for the Asia Pacific region.

*Angela Fox is Senior Vice President and Managing Director at Dell Technologies Australia & New Zealand, and Chair of the Australian Information Industry Association.

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