Australia’s AI Investment Surge: Driving Future Productivity or Risking Workforce Disruption?

The Reserve Bank of Australia’s November 2025 survey of 105 medium-to-large firms reveals that technology investment—particularly in software, cloud‐infrastructure, cybersecurity, and AI/ML—has materially increased over the past decade. Software investment rose from about 6 % of private business investment to 10.5 % in 2024-25 alone. Firms believe that these investments will enhance productivity and lead to labour savings over time, especially as AI/ML tools and robotics/automation are further adopted. However, firms emphasised that realization of productivity gains has lagged behind investment and that embedding new technologies into business workflows, retraining staff, and overcoming regulatory barriers are key hurdles.

On the labour market, firms report that displacement effects have so far been largely offset through redeployment or retraining, but nearly half expect that AI/ML adoption alone will slightly reduce headcount over the next three years, all else equal. There is a significant transition underway in demand for roles, with routine or clerical tasks seen as vulnerable to AI, and growth expected in roles like data engineering, automation, cybersecurity, and business process orchestration. These shifts pose risks for workforce segments lacking access to skills training or mobility, and may exacerbate inequality.

Measured productivity data confirm the survey’s cautionary tone. The Australian Bureau of Statistics reports market‐sector labour productivity growth of ~1.1 % in 2023-24, while multifactor productivity (MFP) rose just 0.1 %. This represents weak performance relative to historical norms and suggests that output growth has largely come from adding capital and labour rather than improving how inputs are used. Quarterly data to mid-2025 show similarly tepid growth (~0.2–0.3 % over the prior year) in labour productivity. Without policy action—regulatory streamlining, skills match, digital infrastructure upgrades—there is risk Australia lags its peers in capturing the economic upside of AI and frontier technologies.

Strategic implications for investors and firms include identifying sectors likely to benefit (e.g. cybersecurity, AI platform providers, cloud/data infrastructure), anticipating shifts in cost structures (e.g. labour vs capital), and monitoring regulatory developments (e.g. data/privacy, industrial relations). Open questions rest on how fast AI adoption will scale deeply beyond pilots, how labour markets adjust structurally, how returns on AI investment will unfold, and whether regulation and governance keep pace.