AI in Australia’s interests: Answering the call
The hour of Australian AI ingenuity is no longer relegated to a distant future. It is here, and now time to accelerate.
Jisoo Kim
Senior Research Fellow: AI and Emerging Technologies,
Perth USAsia Centre
Aaron Brown
Research candidate,
Queensland University of Technology
3 August 2026
Key takeaways
On 15 July, Prime Minister Albanese delivered a much-anticipated speech titled ‘AI in Australia’s interests’. By every metric it greenlit homegrown AI ambition: ‘Our power, our agency, our choice lies in embracing change and shaping it. Not just adopting or accommodating AI. Designing it, making it, building the capability right here. And building our sovereignty – and our economic resilience as a result.’ The hour of Australian AI ingenuity is no longer relegated to a distant future. It is here, and now time to accelerate. Australia’s challenge now is not only to build AI capability for itself, but to define its role in an increasingly contested Indo-Pacific technology landscape.
But accelerate where, and how? What does ‘designing it, making it, building the capability’ look like for Australia in practical terms?
Australia’s current ‘AI triad’
First and foremost, a national strategy must address the three key components of the ‘AI triad’ – data, compute (computing power), and algorithms (underpinned by talent and human capability). When it comes to data, Australia has a significant advantage: access to large datasets. With the right settings around copyright, privacy and data governance, Australia could work towards packaging its rich data assets into a national corpus (similar to the UK’s National Data Library) – by coordinating efforts to sort, clean, and present fragmented data from legacy systems.
On compute, Australia’s critical mineral reserves mean it has a key role in the AI supply chain – however, we lack sovereign processing and the manufacturing capabilities required to become a chip powerhouse. Conversely, Australia is indeed an attractive destination for data centre investment, however, almost all of the infrastructure hosts foreign-owned inference capacity, rather than contributing to Australia’s sovereign AI capability.
And lastly, on algorithms – underpinned by talent – the picture is encouraging, provided the settings are right. Australia is no talent superpower, but it isn’t hollowing out. Stanford’s 2026 AI Index ranks us among the stronger performers on talent quality, with half of our top AI authors and inventors holding PhDs (50.5 per cent, second only to the UK). Domestic universities produce capable graduates, but not enough of them. According to a 2024 Tech Council of Australia report, there were roughly 33,600 AI workers in 2023, about a sixth of the 200,000 the sector may need by 2030. The task, then, is to widen the pipeline and hold onto the talent we train – through retention incentives, skilled migration settings, and investment in applied skills.
Australian strengths and strategic vulnerabilities
Faced with these realities, Australia must pursue a strategy based on both its capabilities and limitations. It should identify strengths and weaknesses, and leverage comparative advantages to outmanoeuvre vulnerabilities.
A key weakness is Australia’s relatively low level of AI capability and technological adoption. Australia was ranked 24th (out of 36) in Stanford’s AI Vibrancy Index, which measures AI adoption and development. One of the authors (Kim) has previously made the case that infrastructure, not models, should be Australia’s priority – and that case still holds. But the geopolitics of the past year has moved models closer to an essential investment, rather than an optional one. Australia remains dependent on AI models developed in the US or China, reflecting limited domestic capability in building our own AI systems.
The former we naturally gravitate to as a historic ally with mutual interests for a free and open Indo-Pacific. The latter, however, warrants caution, given growing competition and the risks associated with dependence on China’s AI value chain, which may not align with Australia’s long-term interests.
However, even relying on an old ally can expose faultlines in Australia’s dependency on the US’ AI ecosystem, highlighting the risks of over-reliance on any one AI system or supply chain. Vulnerabilities were illustrated last month when Anthropic’s Fable 5 was removed under US export controls, OpenAI’s GPT-5.6 access was taped off for organisations vetted by the US government only, and Microsoft 365 commercial prices increased up to 43 per cent.
In other words, whether we like it or not, because Australians are strong consumers of AI (ranked 11th globally by Microsoft in AI diffusion) but not strong producers of AI, we currently suffer these shocks with no alternatives.
For strengths and capabilities, we have the usual big-ticket items: world-class universities, critical minerals, renewable energy capacity, stretches of uninhabited land, strong institutions, and a stable democracy. The ‘tyranny of distance’ remains an ace as Australia’s ‘remoteness from conflict’ proves a unique advantage to infrastructure resilience. Away from European or Middle Eastern wars, equipped with subsea cables and proximity to high-growth markets – the Albanese Government has recognised and capitalised on growing interest from data centre investors and hyperscalers eager to do deals down under. Last but not least, Australia has highly capable friends between the Commonwealth, AUKUS, and Five Eyes. Put these together and we have a formidable dashboard of strategic levers.
We have a formidable dashboard of strategic levers.
Realistically, Australia is unlikely to become a global AI superpower. However, it can position itself as a leading middle power in the region, shaping how AI is developed, governed, and utilised across the Indo-Pacific. The challenge then is not to compete across the entire value chain, but to identify the areas where Australia has the greatest competitive advantage and can deliver long term value.
Australia’s AI strategy would be best based on collaboration and reciprocity, not competition. Success should then be measured by the role Australia plays in building a trusted AI ecosystem across the Indo-Pacific, as many regional partners face similar dependency challenges.
The way forward – three strategic priorities
With these foundations in place, it is not a matter of whether Australia should engage with AI, but where we can have the most impact. Three key priorities stand out, to address three core questions: Accelerate where? Accelerate how? Which levers first?
Priority 1: Become a trusted AI infrastructure provider in the region
Data centres are perhaps Australia’s greatest strategic lever, and we should pull them on our own terms. Australia should continue investing in hosting and building data centres, while also developing the engineering expertise needed to make them more sustainable and resource efficient. Australia’s mark in the global AI value chain may not be competing for compute capacity against major AI nations, but becoming a leader in ethical, innovative, and sustainable AI infrastructure.
Priority 2: Build sovereign capability in critical areas
But data centres alone will not be sufficient to address Australia’s strategic vulnerability. We remain dependent on foreign AI models that are ultimately controlled offshore. We cannot risk economic dependence on tech whose off-switch is in another country. For this reason, Australian AI aspirations must include the development of its own sovereign back-up capability – through trusted open source models, and an indispensable position in the global compute supply chain to negotiate and secure access to the best frontier technology.
We cannot risk economic dependence on tech whose off-switch is in another country.
Priority 3: partnerships
But we do not have to do this alone. Our key strength has long been our ability to build trusted partnerships. Like Australia, much of the world is also seeking independent solutions against being tethered to offshore AI systems. The EU, Canada, and the United Kingdom are all exploring pathways to strengthen sovereign AI capability. This raises a broader possibility – could the Commonwealth provide a platform for trusted AI collaboration?
The UK, Canada, and Australia could combine resources, expertise, and sovereign data to build its own open source model, creating additional supply chain options and reducing reliance on any one country or provider. Existing Five Eyes trust, interoperability, and compatible legal frameworks make this cooperation practical, not just aspirational. The objective is not total independence, rather greater resilience through shared governance, capability building, and diverse supply chains.
It is obvious that such a multilateral Commonwealth AI project would require significant financial resources, and large-scale, long-term coordination. But it is important to remember the timeline we are on. We are laying the groundwork for centuries to come, in which a decade of planning and development is minutiae.
We are laying the groundwork for centuries to come, in which a decade of planning and development is minutiae.
Answering the call
The prime minister has given the greenlight to AI ambition and ingenuity. The challenge is now to answer this call – by building trusted infrastructure, developing sovereign capability where it matters most, and strengthening partnerships with like-minded countries. Australia cannot, and will not, match the world’s largest AI nations in scale. Our opportunity is to create our own place in the global AI supply chain as a trusted, resilient, and strategically valuable regional partner.
About the authors
Jisoo Kim is a Senior Research Fellow: AI and Emerging Technologies at the Perth USAsia Centre, and the Co-Founder and Director of ClearAI, an Australian advisory helping organisations adopt artificial intelligence responsibly and strategically.
Aaron Brown holds an MA in Global Security and is a former US Navy officer, now a research candidate at Queensland University of Technology.
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