Only months ago, much of the AI debate centred on systems, chips, compute and scale. Now governments and firms must simultaneously grapple with agents, cybersecurity, open versus closed models, electricity, data centres, liability, public legitimacy and sophisticated approaches to AI safety. The change is no longer occurring in one dimension; the transformations themselves are becoming continuous.
For Australia, the objective should therefore not be to sit at the technological frontier in every dimension. It should be to remain sufficiently connected to that frontier that our institutions, firms and infrastructure can respond as it moves.
This requires being fast and safe at the same time. That is not the same as choosing between innovation and regulation. Moving too slowly can leave Australia dependent on technologies, standards and infrastructure decisions made elsewhere. But regulating each new development through rigid rules can create a different problem: institutions designed around one generation of technology may be poorly suited to the next.
Australia’s existing policy architecture already recognises this tension. The National AI Plan (Opens in new window) combines three goals: capturing the opportunity, spreading the benefits and keeping Australians safe. The government’s policy for responsible use of AI in government (Opens in new window) similarly combines adoption with accountability, transparency, impact assessment and staff capability.
The more difficult question is whether Australia can turn those principles into an enduring capability. This connects to an idea I have been developing around capability advantage. Capability advantage is not simply possessing the right assets today. It is being better positioned after one transformation to undertake the next. Every transformation leaves an inheritance: new infrastructure, knowledge, relationships and organisational routines, but also dependencies, rigidities and capability debt. For countries, the same principle applies. An AI policy adopted today should therefore be judged not only by whether it addresses today’s risks, but by what capabilities it creates for responding to tomorrow’s technology.
That means asking different questions of policy. Does it improve government’s technical expertise? Does it strengthen relationships between regulators, universities, infrastructure providers and technology companies? Does it make it easier to evaluate new systems as they emerge? Does it create infrastructure that can accommodate the next generation of compute? And does it strengthen public trust sufficiently to allow beneficial technologies to be deployed? The establishment of the Office of AI in the Department of the Prime Minister and Cabinet (Opens in new window) is maters here because it creates a coordinating mechanism across government. But the next step is to ensure that coordination itself becomes a capability rather than another institutional layer.
Australia also needs to think about these issues as parts of one system rather than as separate policy files. Models cannot be separated from compute, data centres, energy, skills, cybersecurity, regulation and social licence. A country can develop strength in one layer of the AI stack while finding that progress is constrained somewhere else. Australia cannot know where the next bottleneck will arise. It may be compute. It may be electricity, cyber resilience, specialised skills, access to frontier models or public acceptance. That uncertainty is precisely why adaptability matters.
The United States can debate how quickly it should push the technological frontier because many of the firms creating that frontier are American. Australia faces a different problem. It must ensure that when the frontier moves, it has the capabilities to absorb, govern and deploy what comes next. This is the next stage of AI capability advantage. Australia does not need to win every AI race, nor does it need to lead every technological transformation. But after each transformation, it should aim to be better positioned for the next one.
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