A Critical Review of the Current State of AI in Australia

Australia might be sleepwalking into AI irrelevance.  We currently produce 1.9% of global AI research but capture just 0.2% of global patents, a commercialisation dilemma that threatens to relegate us to an AI-consumer base for global tech firms.

A recent report by KPMG ranks Australia as one of the least excited and optimistic countries about AI, among 47 countries surveyed. The only country trailing us is our neighbour, New Zealand. But the real crisis isn’t just emotions, it’s our failure to translate research excellence into economic value.

Stanford University’s AI Vibrancy ranking places Australia 29th globally. This is behind many developing economies, including India (4th), UAE (5th), and Malaysia (26th). An economically dangerous position to be in.

The Research-Commercialisation Paradox

Australia’s University of Technology, Sydney, ranks 3rd globally among 142 AI research institutions. Australian universities contributed 1.9% of global AI research in 2024. Though it is a 1.7 point decline from 2.6% contribution in 2015. Department of Industry, Science, and Resources argues that this is because of “the extraordinary global expansion of AI research”. However, in practical terms, Australia registers just 0.38 patents per 100,000 inhabitants, compared to South Korea’s 17 and Luxembourg’s 15.

This represents a staggering 23:1 ratio of research publications to patents, indicating an inability to commercialize breakthrough science. As of 2024, Australia has produced zero notable AI models.

The problem stems partly from chronic underinvestment. Australia spends just 1.7% of its GDP on research, well below the OECD average of 2.7%. This also explains why we are not able to keep up with the global AI research contribution. Now, the deeper issue is structural: 85% of Australian AI companies employ fewer than 50 staff, demonstrating a lack of scalable innovation ecosystems.

From 2013-2024, Australian AI companies attracted just US$4 billion in private investment. Even if we ignore the US and China, this still trails far behind the UK ($28 billion), Canada ($15 billion), Israel ($15 billion), and India ($11 billion).

Source: Stanford Human-Centred Artificial Intelligence, AI Index Report 2025

The talent crisis deepens

Australia’s workforce data reveals the human cost of this inaction. The current mix of AI talent in our workforce is alarmingly low. For example, Israel employs 1.96% of its workforce in AI roles; Australia doesn’t even make it to the global top 20 list for AI talent concentration. This can point to a couple of things. Firstly, as we noted above, a lack of scalable commercial undertakings. With a vast majority operating with fewer than 50 staff, AI hardly makes any dent in the overall economic pie of Australia.

Source: LinkedIn AI Talent Concentration (Published March 2025).

The second issue is much deeper and nuanced. It might be pointing to a situation where non-AI firms (traditional FMCGs, construction, banking, and retail) are not innovating enough to create a substantial ecosystem of AI jobs relative to other mainstream roles. However, we need more data to support or reject this hypothesis.

The result of this is evident from the KPMG study, which found that only 24% of Australians surveyed completed AI training, ranking 43rd among 47 countries. Upskilling, to a large extent, depends on how much workers are going to use a specific skill on the job. Simply, if there are not enough opportunities, the incentive to learn diminishes. Despite that, with one million technology workers currently, Australia would need another 300,000 by 2030 to cater for the current trajectory of growth, according to the Australian Computer Society. This in itself requires a massive upskilling program that doesn’t yet exist.

Becoming an AI Consumer

Foreign data centre investments, like the one announced by Amazon, while politically popular, risk turning Australia into what CSIRO correctly identifies as an “AI knowledge generator”. We export cutting-edge research and IP while importing finished AI products from the same companies using our unique local infrastructure advantage.

This consumer AI economy, prioritising foreign investment over sovereign capability development, creates dangerous vulnerabilities. Geopolitical tensions could sever our access to critical AI capabilities, while brain drain accelerates as local talent seeks opportunities in more lucrative markets.

We need to remember, at the end of the day, these foreign investments in infrastructure are meant to produce a return for these big firms. Yes, it will create local jobs and might provide access to some local storage and compute; the biggest winners are always going to be these firms.

Call to Action

Australia could follow Canada’s Sovereign AI Compute Strategy, which allocated $2 billion for AI development, including $300 million dedicated to providing affordable computing power for Canadian SMEs developing domestic AI solutions.

With the majority of Australia’s AI ecosystem comprising SMEs, such targeted support could transform commercialisation rates. Australia needs a National AI Investment Fund focused exclusively on research translation, commercialisation, upskilling, and sovereign infrastructure. This is just an immediate step. We need to increase of R&D funding to GDP ratio to at least be at par with OECD average of 2.7%.

On upskilling, we can learn from Malaysia’s model. They have established a Human Resource Development Fund (HRDF Corp), which gets funded through a kind of learning and development levy on corporations. Employers contribute a percentage of their payroll spend to the fund, which they can then claim back by conducting approved training for their workforce.

The choice ahead

The window for action is narrowing, but it hasn’t closed. Australia’s research foundations remain strong, its talent pipeline promising, and its strategic position valuable. With decisive policy reform and transformational investment, we can still translate our academic strengths into economic advantages.

The alternative, technological dependence in the form of foreign investment, offers the illusion of progress while making Australia a consumer rather than the creator of AI innovation.

We have played a huge role in the present AI revolution through our brilliant research. The question now is whether we want to shape that revolution’s future, or simply observe it from the sidelines.

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About the Author – Tariq Munir

Tariq is the Author of “Reimagine Finance” and advises businesses on unlocking the potential of AI, Data, and Digital. He is also an international keynote speaker, trainer, and monthly columnist at CFO Magazine A/NZ.

He can be reached at [email protected] or www.tariqmunir.me