How Australia can become a leader in AI beyond being a data centre hub

In the AI revolution, Australia has a considerable opportunity to be more than just a resource hub for AI infrastructure.

There is increasing momentum behind the idea that we can become a leader in AI infrastructure. The story is compelling. Recently, Amazon announced plans to invest AU$20 billion from 2025 to 2029 to expand and operate its Australian data centre infrastructure. This is a significant and positive signal.

While being a leader in infrastructure is great, Australia could leverage this opportunity to become a leader. If we focus purely on compute and real estate, without reshaping how we work, we risk building the backbone for someone else’s revolution.

The ideas are here. What’s missing is action.

Australia’s infrastructure story matters. Sovereign cloud capabilities and data capacity are foundational. But infrastructure is only the means. The transformation will be driven by how AI is applied at scale across organisations and sectors. And that’s where we need to do better.

In 2024, the United States led global private AI investment, reaching $109.1 billion, nearly 12 times China's $9.3 billion and 24 times the U.K.'s $4.5 billion, according to the Stanford AI Index 2025. This surge underscores the U.S.'s dominant position in AI development. The US is pulling away, not because of infrastructure alone, but because of bold and ambitious experimentation and industry-wide adoption.

In Australia, we are seeing a different pattern. Our federal investments are growing, but still modest. According to the Stanford AI Index 2024, Australia's federal AI investment in 2023 remained modest compared to global leaders, sitting at around US$74 million, significantly behind countries like the United States, China, and the United Kingdom. We often highlight our geographic or environmental advantages but stop short of addressing the deeper issues. The real challenge is cultural.

We are not behind on ideas.

We are behind on execution.

Mindset, not capability, is our constraint

At The Strategy Group, we see this gap every day. Executives are talking about AI. Boards are curious. Teams are interested. But only a handful of organisations are moving beyond surface-level pilots. Microsoft Copilot deployments are a popular first step, but they are not the end goal. Often, these tools are adopted in silos, disconnected from broader service strategy or transformation plans.

We have adapted to this in our practice. Coming out of our recent strategy day, we’ve reaffirmed AI as a core priority, both in how we operate internally and how we support clients. The shift is not just technological. It is organisational. It’s about changing how we deliver value.

In my view, Australia is 12 to 18 months behind North America when it comes to meaningful adoption. Not because we lack talent or interest, but because we treat AI as a side project. The most common misconception is that AI sits solely in the IT domain, and can be trialled quietly in the background.

This couldn’t be further from the truth.

AI is a business tool. It has implications for how we design services, structure teams, serve customers, and make decisions. If executive leaders are not engaging with AI directly, and not asking how it changes the shape of their core operations, then they are missing the point.

What needs to happen now?

Organisations need to move past curiosity and into commitment. That means permitting teams to explore. It means investing in internal fluency so leaders can engage with the technology. And it means linking AI to real service or business problems, not treating it as a standalone innovation stream.

This is not about doing everything at once. It’s about doing something with urgency and intent.

Government and industry must move together

The government has a critical role, particularly in creating the conditions for responsible innovation. But the private sector must act with equal resolve.

We’ve seen this story before. I often refer back to the Innovation Nation with my team, and how there was a clear vision behind Malcolm Turnbull’s Innovation Nation agenda. That vision wasn’t perfect, but at least there was a “why”. Today, the AI agenda risks being diluted by competing priorities and reactive regulation. We are caught between accelerating hype and hesitant regulation. Caution is understandable, especially with powerful technologies. As Yuval Noah Harari argues, AI deserves scrutiny just like any major public system.

Efficiency is the starting point, not the strategy

Many organisations are pursuing AI with an operational lens. They are looking for tactical wins and incremental productivity. That’s a fair place to begin. The next step is to commit and use AI to reimagine service delivery and unlock entirely new forms of value.

If we don’t treat AI as a strategic lever, we won’t just fall behind competitors. We’ll fall behind our own people. Employees and customers are already using these tools i[LH1] n their everyday lives. They expect the organisations they interact with to do the same.

Where should Australia lead?

We are not going to outspend the US or China. But we can lead where we have natural strength. Applied AI in health and human services. Cybersecurity. Predictive analytics. Sectors where we have capability and credibility.

Startups like InsightWise are already showing what’s possible. Their data analytics platform is helping organisations and consultancies focus on strategic tasks rather than manual analysis, saving hours a week. This isn’t hypothetical. It’s happening now. What we need is stronger capital support and coordinated policy to help companies like this scale.

The real opportunity is how we apply AI, not how we host it

Amazon’s investment should be seen as an enabler, not the headline. The infrastructure story is important, but it cannot be the main conversation. The value of AI lies in how it changes work, services, and outcomes.

We should be asking: how do we become known globally for how we apply AI to improve lives and build better institutions?

We have a choice. We can be the warehouse for the world’s AI systems. Or we can shape the future of how those systems are applied.

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