Cautious approach to AI regulation welcome, but business support is key to unlocking productivity gains

• Government shouldn’t just assume SMEs are ready and able to adopt AI
• Productivity Commission right to urge long-overdue mandated digital financial reporting

The Productivity Commission is right to recommend the government be cautious on the regulation of artificial intelligence, but has missed an opportunity to recommend meaningful investment in supporting businesses to harness its potential, says Australia’s largest accounting body, CPA Australia.

The Commission’s second interim report ahead of the Treasurer’s Economic Reform Roundtable lays out a sensible framework for future AI regulation, but its lack of discussion on how best to encourage SMEs to adopt technology, including AI, is a missed opportunity, says CPA Australia’s Business Investment Lead, Gavan Ord.

“This is definitely not an ‘if you build it, they will come’ scenario,” said Mr Ord. “The Commission’s report questions whether Australian businesses are already behind the curve internationally in the adoption of AI – and the answer is a categoric yes.

“We needed the Commission to provide recommendations to government on incentives to help boost the uptake of technologies, including AI, as well as guidance on the benefits and practical support that businesses need to implement it.

“The report assumes a level of knowledge, expertise and capability that doesn’t match reality for many SMEs who focus 100 per cent of their time and effort on getting through each day with little time to consider investing in technologies, even if they think it could be beneficial to do so.”

Mr Ord points to CPA Australia’s annual Asia-Pacific Small Business Survey as evidence of the uphill battle facing Australian businesses. The survey highlights how small businesses in other markets, most notably Singapore, Malaysia and Vietnam, benefit from much higher technology adoption levels.

The latest survey found that just 26% of Australian small businesses have invested in new technology that has proved profitable over the past 12 months, compared with a survey average of 56% across the 11 markets included in the research.

Only 39 per cent of Australian small businesses reported that more than 10 per cent of their revenue comes from online sales, compared to the survey average of 67 per cent. Likewise, only 18 per cent of Australian small businesses sought expert advice from IT consultants or specialists last year compared to the average of 28 per cent.

Just 55 per cent of Australian small businesses said they expect to grow in 2025, compared with the Asia-Pacific average of 71 per cent.

“In addition to ensuring a sensible approach to AI regulation, the government should invest in supporting business growth by offering better incentives for the uptake of technologies than is currently the case, as well as providing educational programs on how to benefit from it,” said Mr Ord.

CPA Australia welcomes the Productivity Commission’s recommendations to make digital financial reporting mandatory for disclosing entities and urges the government to proceed with its rollout for listed companies first, through a phased implementation approach.

“This does not need to be an issue for the Treasurer’s roundtable,” said Mr Ord. “The benefits of digital financial reporting for businesses and the community more broadly are clear and already being evidenced around the world. A phased approach should begin as soon as it is practical to do so.

“Manual data extraction is expensive, slow, and prone to error. Digital financial statements are machine readable and with aid of digital tools, including AI, can be easily and accurately analysed by investors, audit firms, regulators, and others.

“Australian companies have had the ability to voluntarily lodge digital financial reporting for over a decade, yet its complete lack of uptake underscores how challenging it can be – even for large enterprises – to adapt to technological change.”

“Cost-free access to corporate financial data is bound to result in macroeconomic benefits that go to the heart of this inquiry. We’ve contemplated long enough, the time has come make digital financial reporting a mandated reality.”