The global AI race is fully taking shape. Billions have been invested by leading frontier AI developers like OpenAI in the United States and Huawei in China.
Beyond Washington and Beijing, many other countries are rapidly trying to find their place in the global AI ecosystem, from the United Arab Emirates’ large-scale investment in AI firms to France’s new build-out of its supercomputing capacity.
In turn, finding a place in this AI value chain is not only lucrative for many nations – AI is expected to contribute some US $15.7 trillion to the global economy by 2030 – but also vital for their strategic competitiveness.
Australia, however, has yet to find a clear place in the global AI ecosystem – but it is imperative for us to do so and have an AI playbook. Otherwise, Australia risks being left behind on reaping the benefits of the global AI revolution, leaving our nation less prosperous and secure in the years to come.
This piece outlines the beginnings of a three-pillar strategy designed specifically to draw on Australia’s competitive advantages, to capitalise on the benefits of today’s most important technological revolution: AI. By implementing policies focused on critical minerals, data centres, and entrepreneurship, Australia can cement its place as an integral player in the global AI value chain.
Pillar one: Critical minerals
The global AI revolution is highly dependent on several extremely rare critical minerals. For example, cobalt and tungsten are used in the transistors in semiconductors, the hardware underpinning the entire AI industry.
Meanwhile, lithium is used in the batteries that store energy in data centres. Other minerals like vanadium may be crucial in future advancements like neuromorphic computing. Today, however, global critical minerals supply chains are dominated by China, which possesses ~60 per cent of global production and ~85 per cent of global processing capacity.
As geopolitical tensions between the US and China have grown, Beijing has increasingly imposed export controls on critical minerals like germanium and gallium, which has led the US and its allies to look for new sources of these minerals.
Australia is strategically positioned to be a key player in critical minerals. Australia is home to some of the world’s largest deposits of cobalt, lithium, tungsten, and many other critical minerals, without which AI development cannot take place.
Australia should build on our efforts to enhance the mining and processing of these critical minerals, using mechanisms like public-private partnerships and public investment. Already, Australia is making progress in boosting our critical minerals support, including proposed production tax credits as part of the Future Made in Australia agenda and a new Minerals Security Partnership with the US and others.
Looking forward, Canberra should bolster its efforts to help Australian firms compete with their Chinese counterparts, as Beijing now grants its firms extensive subsidies that lower the cost they incur for mining and processing these minerals.
Pillar two: Data centres
Australia, however, should not just aim to be a producer of raw materials alone but capture other parts of the global AI value chain.
One critical niche that Australia is particularly well poised to win is in data centres. Modern AI systems increasingly require large data centres that consume ever-growing amounts of power – by the end of the decade, for example, it is estimated that centres might consume five gigawatts (GW) of power, or as much as a major American city.
In turn, most countries in the world will struggle to access this kind of energy. For example, Ireland – Europe’s leading hub for data centres – faced such power constraints due to data centres that the country’s grid was forced to limit the construction of new data centres near Dublin.
Australia has a unique advantage in the data centre race due to its immense potential to produce renewable power. Australia has abundant access to solar and wind power, given our geographic features, and can also produce many of the needed materials needed for green systems. These two factors mean Australia can produce more power for data centres, and much of it would be renewable, allowing leading corporate players to power large data centres while meeting their net zero emissions goals at the same time.
In turn, becoming a hub for data centres would offer several benefits for the Australian economy. Not only do data centres create jobs directly for the people running them, but according to estimates from PwC, every job created in a data centre on average leads to 7.4 more jobs created indirectly as well.
Canberra, of course, should be careful not to overinvest in data centres to avoid straining Australia’s power grid. However, efforts to incentivise data centre construction in certain regions of the country, invest in and harmonise regulations to enable the expansion of Australia’s renewable energy supply, and more could help Australia be a competitive location for future data centres in the global AI economy.
Pillar three: Entrepreneurship
While Australia can quickly become a critical node in the data centre and critical minerals industries, Australia should also invest in becoming a leading player in AI entrepreneurship. Such a focus will require a whole-of-government effort that may take years or longer, but the benefits to Australia could be immeasurable in creating jobs, boosting domestic innovation, and improving Australia’s national security.
Australia should begin with a comprehensive reform of the education system to increase the supply of STEM graduates that can found technology firms, as a report by the Australian Computer Society (ACS) found the country had the lowest concentration of AI talent compared to six other developed countries.
The same ACS report also highlighted a need to boost the sluggish $0.6 billion in private investment in AI that Australia saw in 2023, which was lower than peers like Canada, Sweden, and Singapore.
Doing so may be tricky, but potential mechanisms could include expanding tax credits for private-sector AI research, as the United Kingdom has done. In addition to private investment, Australia needs greater public funding for AI research and development alongside efforts to launch partnerships between academia and industry, like the new partnership between the University of Adelaide and the Commonwealth Bank. These partnerships will enable new AI breakthroughs that will keep Australia’s technology firms globally competitive.
For these efforts to work, of course, Canberra will need to invest significant resources and time to make Australia a competitive technology hub. However, taking action now is vital to ensure Australia begins gaining ground in the global AI economy.
Alongside efforts to boost data centre construction and critical minerals production, the result will lay the foundations for everyday Australians to capture the rewards and share in the prosperity of our AI future.
Helen Zhang is a non-resident fellow at the United States Studies Centre at the University of Sydney
Do you know more? Contact James Riley via Email.