James Henderson

AI evokes emotion in Australia. But does excitement translate to adoption?

Not all technologies trigger a connection and seldom do they permeate the public consciousness – usually they remain consigned to IT department corridors.

Based on market sentiment, artificial intelligence (AI) bucks that trends – chiefly generative AI (GenAI).

According to Deloitte, 72% of Australian business and technology leaders list “excitement” as the top sentiment when it comes to Gen AI, which is 11% higher than the global average.

That statistic should not be underestimated. Does IT infrastructure, enterprise networking or modernised applications carry such allure? Even the early days of cloud didn’t generate this level of enthusiasm.

“GenAI is transformative technology and we’re already seeing significant opportunities for innovation and productivity improvement across many industry sectors,” said Adam Powick, CEO of Deloitte Australia.

Adam Powick (Deloitte Australia)

Such opportunities are playing out in the numbers with 79% of local leaders expecting GenAI to drive “substantial transformation” within their organisation and industry over the next three years.

Citing local data from the Deloitte AI Institute – The State of Generative AI in the Enterprise: Now Decides Next – Powick offered a note of caution however.

The chief barrier to adoption is technical talent and skills (49%) across the country – notably 14% higher than the global average. This is in addition to ongoing issues related to intellectual property (40%).

“As business leaders, we need to find a balance between mitigating the risks of this technology and unlocking and empowering ideas for improving client service, quality and the way we work,” Powick outlined.

“Driving benefits at scale requires a clear strategy and governance model, access to the latest technology and expertise, and a focus on workforce education and re-skilling as organisations try to keep pace with this rapidly evolving technology.”

In dissecting the challenges facing organisations, the majority of Australian businesses (60%) remain wary that the rise of Gen AI tools and applications will “erode trust in national and global institutions”.

Significantly, almost all executives (86%) see a need for more global regulation to manage the widespread adoption of Gen AI, supported by local governance.

As shared by Kellie Nuttall – AI Institute Leader at Deloitte Australia – the market will only see the full transformative potential of GenAI when it is applied at scale.

“With the right focus on the right value pools,” Nuttall stated. “To do this, organisations will need to move from use case experimentation to full integration across their businesses.

“Underpinning this will be the need for organisations to develop strong ethical and cultural practices around AI. This will be as important as AI utilisation itself.”

First released at the World Economic Forum – an annual meeting held in Davos, Switzerland in January – the report is based on a survey of more than 2,800 executives across six industries and 16 countries.

In Australia, 57% of organisations are sufficiently educating employees on the capabilities, benefits and value of Gen AI, in direct response to ongoing up-skilling concerns. Also, almost a quarter of companies (21%) are “highly” or “very highly” prepared to address governance and risk issues as they arise.

“Businesses are moving towards prioritising investment in Gen AI to unlock tangible benefits for their clients and their people,” outlined Stu Scoti, Strategy and AI Lead Partner at Deloitte Australia.

“Employers are also seriously thinking about workforce design as AI increases demand for some skills and makes others less relevant. Already we’ve seen a growing demand for education and skills training with more than 600 people passing through our AI Fluency workshops.”

AI in a soft Australian economy

The context in which Australian businesses are assessing the potential of AI is a “soft economy” entering a delicate stage of post-pandemic rebalancing in 2024.

According to Deloitte’s Business Outlook, global growth is likely to slow below trend before pivots in monetary policy return economic activity to a more sustainable path. Disinflation is likely to continue but at a slower rate and on a bumpier path.

Meanwhile, the outlook for the Australian economy remains equally soft.

Based on data released for the December quarter of 2023 by the Australian Bureau of Statistics (ABS), the national economic growth rate dipped below 2% for the first time in three years.

“That shouldn’t come as a surprise given the Reserve Bank of Australia [RBA] lifted the cash rate by 425 basis points through 2022 and 2023, with many Australian households struggling as a result,” explained Stephen Smith, Partner at Deloitte Access Economics.

“If realised, and excluding the pandemic period, the forecast growth of 1.3% in calendar year 2024 would be the weakest since the early 1990s recession.”

As a result, Deloitte Access Economics therefore expects 2024 to be a year when the mindset of economists and policymakers shifts from lowering inflation to raising economic growth.

“That means economic conditions will keep feeling pretty tough for a while yet,” Smith added. “And so, as the disruption of COVID-19 recedes from view, the Australian economy is likely to be heading back to where it was before the pandemic stole the headlines.”

With lifting the rate of growth high on the business agenda, Smith said some industries look to have turned a corner while others are bracing for pain still to come.

“The mining industry has defied soft global demand, yet that outperformance looks likely to fade,” he added. “Cost of living pressures have plagued the retail industry for almost a year, while a surge in international students in 2023 led to a rampant recovery in the education industry.”

This context is crucial amid the AI adoption conundrum facing Australian businesses. In a recovering economy on the path to strong health, is this technology currently in the “need to have” or “nice to have” camp?

According to Gartner, this is simply a case of timing.

Behind cyber security, 79% of Australian CIOs are expected to direct the largest amount of new or additional funding towards cloud platforms during the next 12 months, followed by data analytics (78%).

Despite the recent hype, AI and machine learning is ranked in sixth place (62%), with investments directed towards increasing operational efficiency and bridging IT talent gaps.

“This will change, however, once organisations move past the proof-of-concept stage, particularly for GenAI,” said Andy Rowsell-Jones, Vice President Analyst at Gartner. “Currently only a small number of organisations are edging towards production with their GenAI trials – deployment is when the real investment starts.”

Referencing local data – published via the 2024 Gartner CIO and Technology Executive Survey – Rowsell-Jones labelled GenAI as a “top game-changing technology” for next year, capable of rapidly advancing the democratisation of digital delivery beyond the IT function.

While only 10% of CIOs have already deployed GenAI technologies, over half (58%) say they will initiate deployment over the next 24 months.

“GenAI platforms are reducing the barriers to adoption for software developers, which means the technology is poised for rapid deployment,” Rowsell-Jones added. “CIOs should harness this capability and provide the guardrails to support and facilitate business technologists keen on GenAI adoption in the wider organisation.”


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