Andrew Leigh: Only 7% of Australian Businesses Broadly Use AI. That Should Worry Us

Why It Matters

The AI adoption shortfall limits productivity growth and wage gains for the majority of Australian workers, making policy‑driven diffusion critical for economic prosperity.

Key Takeaways

• Only 7% of Australian SMEs report broad AI use.
• AI adopters see higher hiring and sales, per French firm study.
• Budget makes $20k (≈$13k) instant asset write‑off permanent.
• Non‑compete clauses removed for workers earning under $183k (≈$120k).
• Diffusion of AI crucial for national productivity and living standards.

Pulse Analysis

Australia’s AI adoption gap mirrors earlier technology diffusion cycles, where the true economic dividend emerged only after tools moved from pioneering firms into everyday workplaces. While AI promises higher hiring and sales—evidenced by French firm‑level research—just 7% of Australian SMEs have embraced it broadly, leaving the bulk of the workforce at risk of lagging behind productivity gains seen in sectors that adopted electricity, computers, and the internet.

The 2026 budget seeks to accelerate diffusion by cementing the $20,000 instant‑asset write‑off (roughly $13,200 USD) as a permanent incentive, giving small businesses certainty when investing in AI‑enabled equipment. Simultaneously, the removal of non‑compete clauses for employees earning under $183,000 AUD (about $120,000 USD) aims to boost labor mobility, allowing ideas and skills to spread faster across firms. Government procurement and public‑sector pilots can further showcase practical AI applications, creating reusable standards and lowering adoption barriers for SMEs.

For workers, broader AI uptake translates into higher‑value tasks, upskilling opportunities, and ultimately better wages. Treating skills as core economic infrastructure—rather than a remedial fix—ensures employees can harness new tools, while flexible labor markets accelerate the flow of innovation. If Australia can replicate the diffusion success of zero‑till farming across its modern economy, AI could become the next productivity dividend, lifting living standards and sustaining long‑term growth.