Australia's patchy adoption of artificial intelligence and mounting regulatory burden could leave the nation trailing behind global competitors, according to a new submission from the Governance Institute of Australia to the Productivity Commission.

The national membership association, representing over 7,500 governance and risk management professionals, has called for sweeping structural reforms to unlock Australia's digital potential, warning that current regulatory complexity is stifling innovation and pulling business leaders away from strategic thinking.

The submission reveals a stark divide in Australia's AI landscape: while 40% of organisations are already using AI technologies, 38% have no plans to adopt them, primarily due to capability gaps and costs. This hesitancy comes despite government estimates that AI could add up to $A600 billion annually to Australia's GDP by 2030.

"Australian business leaders have demonstrated higher levels of scepticism about the benefits of AI than their international counterparts, putting Australia at risk of falling behind," the Institute warned in its submission.

The problem is compounded by underinvestment in AI capability. Australia's government spending on AI per business falls significantly short of comparable nations, with Canada and Singapore investing $A2.7 billion and $A5 billion respectively over five years.

Regulatory Burden Choking Innovation

The Institute's 13 recommendations centre on reducing regulatory complexity that members say is increasingly diverting board attention from growth-focused strategic thinking to compliance reporting.

Interim CEO Katrina Horrobin highlighted particular concerns with outdated legislation, noting that the Corporations Act 2001 – now over 20 years old – has been deemed "no longer fit for purpose" by the Australian Law Reform Commission due to its complexity.

"The heavy focus on reporting is pulling boards away from strategic focus and risk-taking that is central to drive growth," the submission states.

Among the Institute's key recommendations is establishing an independent Corporate Law Reform Body to modernise the Corporations Act and drive holistic reforms to corporate governance.

"Australia can no longer afford to take a reactive corporate law reform approach based on complaints from specialist interest groups proposing ad hoc law reforms," the submission argues.

Privacy Act Changes Need Small Business Focus

The Institute also raised concerns about proposed Privacy Act reforms, particularly the removal of the $A3 million annual turnover exemption that currently protects small businesses from the Act's complex requirements.

"The current size and scope of the Privacy Act 1998 is not user-friendly or fit for purpose for a small business operator," the submission states, recommending special carve-outs for smaller enterprises.

A recent survey of Institute members revealed significant barriers to AI adoption, with 64% of organisations yet to offer any AI training programs and 45% having no plans to do so in the next 12 months. Nearly half of respondents reported receiving no AI training, while 88% cited difficulties integrating AI with existing systems.

Despite 90% reporting AI use in their organisations, 93% cannot measure return on investment for AI initiatives, highlighting the need for better digital literacy programs.

Daniel Popovski, the Institute's Senior Advisor of Policy and Advocacy, recently participated in a national forum in Canberra examining modern data management and governance frameworks, reinforcing the challenges outlined in the submission.

"The democratisation of data collection and processing creates new risks and responsibilities," Popovski noted, emphasising the need for responsibility and ownership at every organisational level.

Government Action Needed

The Institute's recommendations include establishing regulatory review processes, creating AI compliance roadmaps, and developing government-backed assessment criteria for AI systems designed for Australian users.

"Let's govern smarter, not drown in red tape," the Institute concluded, calling for decisive action to prevent Australia from falling further behind its global peers in the digital economy race.

The Productivity Commission is currently reviewing submissions as part of its inquiry into harnessing data and digital technology to create a more dynamic and resilient economy.