Welcome back to Neural Notes, a weekly column where I look at how AI is influencing Australia. In this edition: a new pre-budget submission from the Alliance of Industry Associations tests the ambition of Australia’s National AI Plan. Related Article Block Placeholder Article ID: 328397 Labor’s National AI Plan has no standalone laws, asks businesses to police themselves Tegan Jones Last year, AI didn’t catch a single mention in the federal budget papers. That stood out at the time, particularly given the huge song-and-dance the government had made about it in the preceding two years. But as I said at the time, the 2024–25 budget was AI-heavy. Much of the policy that landed in the back half of 2025 had already been accounted for — from the AI Regulation Roadmap and consultation on high-risk AI, to draft legislation, public sector rules and the long-awaited National AI Plan. When the Albanese government released that plan in December, it made a deliberate choice about how to frame the country’s AI future. It tied AI to productivity, sovereign capability and the broader Future Made in Australia agenda. It also stopped short of introducing standalone AI laws, leaning instead on existing legal frameworks, voluntary guidance, a planned AI Safety Institute, and a bundle of already-announced programs and funding streams. Smarter business news. Straight to your inbox. For startup founders, small businesses and leaders. Build sharper instincts and better strategy by learning from Australia’s smartest business minds. Sign up for free. * indicates required Email Address * By continuing, you agree to our Terms & Conditions and Privacy Policy. It also dumped its proposed AI advisory body. Over the past year, the government has also moved on an AI plan for the Australian public service and updated guidance for AI use in government, quietly shifting much of the governance work into the public sector itself. It has ruled out some of the bolder options canvassed internationally, such as a broad text-and-data-mining exception, and instead emphasised licensing and sector-specific enforcement. At the time, one of the more obvious tensions was that the government talked a big game, but practical support for businesses (particularly small businesses) was limited. The National AI Plan repeatedly stressed that SMEs are central to adoption, but much of what was described involved existing programs rather than new support. It also presented a very confident story about where Australia sits today. The government pointed to high consumer uptake, more than 1,500 local AI companies, around $700 million in private investment into AI firms in 2024, and roughly $10 billion in data-centre investment that year, making Australia the second-largest destination globally. On top of that, it highlighted more than $460 million in existing funding already committed across AI and related initiatives. This includes research grants and accelerator programs from the National Reconstruction Fund and the R&D tax incentive. Related Article Block Placeholder Article ID: 316075 Neural Notes: Can Labor’s second term deliver on AI ambition? Tegan Jones Business shifts the focus to economics That context is what makes the 2026–27 pre-budget submission from the Alliance of Industry Associations particularly interesting. It’s explicit about the kinds of economic settings parts of industry think are still missing. “Australia is in a global contest for capital, and we must be positioned to win more of it,” the submission reads. It also warns that without stronger investment, “Australia risks falling behind, with fewer high-quality jobs, slower wage growth, and less influence over its own future”. Rather than focusing on safety or governance, it pushes the government on more familiar policy levers: R&D, commercialisation, skills, investment settings and infrastructure approvals. In practice, what the alliance is calling for is: Lifting national R&D investment from 1.7% to 3% of GDP Overhauling the R&D tax incentive Creating a National AI Skills Compact Speeding up approvals for data centres and digital infrastructure Making Australia a more attractive place to invest in AI and other emerging technologies Some of these are part of a broader reform wishlist spanning productivity, planning and tax. But they also sit uneasily alongside the government’s narrative that capital is already flowing, infrastructure is booming, and Australia is well on its way to being an Indo-Pacific AI hub. Admittedly, the National AI Plan does acknowledge many of the same building blocks. It highlights strong research capability, rising private investment and a growing pipeline of data-centre projects. It also frames the government’s role as setting the right conditions for adoption and growth. But in practice, the emphasis is still on coordination and existing programs rather than new business-facing levers. Its centrepiece measure, the $30 million AI Safety Institute, sits alongside more than $460 million in previously committed funding, including support for the National AI Centre and the AI Adopt Program. Much of that support is designed to help businesses use AI, rather than change the underlying conditions for investing in it. Comparatively, the Alliance of Industry Associations is pushing for more formal and targeted interventions, such as including a National AI Skills Compact and regulatory settings that are explicitly “pro-investment” and outcomes-based. Related Article Block Placeholder Article ID: 329072 Australia’s planned AI Advisory Body has been dumped Tegan Jones It also frames the problem more bluntly, noting that “productivity growth remains weak, business investment is subdued, and regulatory and structural barriers continue to constrain economic performance”. It is also notable to whom each document is actually speaking to. The National AI Plan devotes significant space to workers, unions and inclusion, positioning AI as something that should be broadly shared. Meanwhile, the Alliance’s recommendations are firmly framed through the lens of investment and competitiveness. What it means for SMEs For small businesses, that difference shows up in a more practical way. The plan itself says just over one-third of SMEs have adopted AI, with adoption lower in regional areas.  There is support available through the National AI Centre and related advisory programs. But most of it is geared towards simply helping businesses use AI tools. Meanwhile, they’re still left navigating the upfront costs, skills shortages, and infrastructure constraints that come with it. The Alliance’s submission is effectively arguing those constraints are the real bottleneck. And that without changes to tax settings, skills pipelines and investment conditions, adoption is likely to remain uneven. The question is: will we see more for AI in these budget papers? With the Iran war continuing and a fuel crisis sweeping the country, it’s hard to say. But what is obvious is the debate is no longer just about how Australia manages AI, but whether it is willing to create the conditions for businesses to actually invest in it. 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