Welcome back to Neural Notes, a weekly column where I look at how AI is affecting Australia. In this edition: does AI have a place in the government’s Future Made in Australia push?
At the National Tech Summit this week, Industry and Innovation Minister Tim Ayres pitched bringing AI inside the government’s Future Made in Australia (FMIA) strategy.
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Until now, FMIA has largely meant hardware and heavy industry such as hydrogen, critical minerals, grid transmission and defence manufacturing. And it’s been backed handsomely by big finance.
But according to Ayres, AI should have a place in the strategy.
“I see AI as an incredibly valuable tool for advancing our government’s broader agenda for a Future Made in Australia,” Ayres said on Tuesday.
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“The application of this general-purpose technology will help drive innovation and direct investment toward the most productive, most value-adding and strategically important Australian industries. Like critical minerals processing. Clean energy manufacturing. Medical technology. Sovereign industrial capabilities in defence.”
Ayres didn’t mince words when it came to placing importance on AI in this context.
Australia could take a fragmented and inconsistent approach to new technology across jurisdictions – or it can develop a coherent national plan that builds confidence among the community.
“Australia could bury its head in the sand while AI disrupts education and existing human capital… Australia could squander the enormous benefits of adopting early – or it can embrace AI to help advance the government’s Future Made in Australia ambitions for a more diverse, internationally competitive manufacturing sector and a cleaner, cheaper electricity system.”
He also tied the issue directly to sovereignty, saying, “Australia could be at the end of a global supply chain, or it can develop national capabilities in AI technology here at home and shape standards for responsible use around the world”.
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AI investment and expansion
There’s no doubt that AI adoption has been at the centre of the private and public sectors over the past couple of years. But the challenge is scale.
FMIA’s headline industries already enjoy multibillion-dollar commitments. Hydrogen Headstart now totals $4 billion, Rewiring the Nation’s transmission overhaul is sitting at $20 billion, and critical minerals funding has doubled to $4 billion.
Added to this are new initiatives such as the $1.5 billion FMIA Innovation Fund and the $2 billion Green Aluminium Production Credits, bringing the Future Made in Australia agenda to tens of billions of dollars in total public investment.
Despite AI constantly being a talking point, it receives only a fraction of this scale in direct allocations. In the 2025–26 federal budget, not a single line item was set aside for AI, contrasting sharply with the recently legislated billions for hydrogen and minerals.
That’s not to say there has been no AI investment. We certainly saw this in the 2024-25 budget. There have also been AI-specific programs and grants, including $392 million for the Industry Growth Program (which sounds awfully similar to the Coalition’s former Entrepreneur’s Program) and support for AI Adopt Centres.
These are useful but remain small by comparison. AI still lacks specific and sustained, large-scale public investment. Even if we take the $1 billion from the increasingly controversial National Reconstruction Fund into account, it’s earmarked for critical technologies in general, not just AI. And a large portion of that has gone towards quantum investment.
The private sector continues to help fill this gap. According to CSIRO, the Australian AI market is projected to reach $315 billion by 2028, reflecting the scale of investment and opportunity attracting international attention.
AI-specific R&D spending has more than doubled, hitting $668.3 million in 2023–24. AWS recently lifted its infrastructure commitment to $20 billion through 2029, with significant spend earmarked for AI, data centres, and clean energy.
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And Microsoft announced a $5 billion package in 2023, its largest local investment in four decades, delivering a 250% expansion in computing capacity and nine new data-centre sites.
On the startup front, Q1 of 2025 saw AI-first startups top deal counts. Of the 100 announced venture and accelerator deals tracked for the quarter, 62% referenced AI-related product benefits.
However, it’s important to note that part of this success is due to businesses tacking ‘AI’ onto their offerings, regardless of whether the technology is core to the product.
Still, VC investment into ‘AI-first’ startups has been significant in recent years. They have become a series regular in our weekly funding round-ups, and there have been notable standouts such as Harrison.ai’s $179 million raise back in February.
But there’s still a way to go if AI is to truly catch up to other players in the Future Made in Australia portfolio that have billions in financing as well as tidy tax credits.
While AI has momentum and rhetoric, it’s still waiting to be funded and governed with the same seriousness as hydrogen, minerals, and the grid.