Andrew Leigh: Only 7% of Australian businesses broadly use AI. That should worry us - Startup Daily

Australia will be more productive when good ideas travel faster.

We rightly celebrate invention: new medicines, better software, advanced manufacturing and clean technology. Discovery matters. But discovery is the opening chapter. The larger economic prize comes when useful tools and smarter systems spread across ordinary workplaces.

A breakthrough in a laboratory is valuable. A breakthrough that helps a nurse, teacher, farmer or small business owner do better work is more valuable still. Innovation changes an economy when it reaches the people who can use it.

That is the diffusion dividend.

From invention to adoption

Australian agriculture offers a powerful example. For thousands of years, farming began by turning the soil over. The plough broke the ground, buried weeds and prepared a seedbed. It was so familiar that many people scarcely thought of it as technology. It was simply farming.

Then Australian grain growers began asking a practical question: could crops be planted while disturbing the soil less? Could stubble stay on the surface, moisture stay in the ground, erosion fall, and farmers save time and fuel?

Zero-till farming was an antipodean kind of innovation: fewer launch events, more farmers standing beside seeders asking whether the thing would work. Scientists helped. Machinery changed. Farmers learned from farmers. Local knowledge turned a promising idea into a working system.

By the late 2000s, zero-till adoption in Australia’s winter cereal regions had reached 80 to 90 per cent. One account jokingly called it a 40-year overnight success. Plenty of work went into informing farmers about best practice, and sharing the benefits across the nation.

The lesson reaches well beyond agriculture. Australia backs invention, research and enterprise. The 2026 budget strengthens the incentive to create new knowledge by better targeting the Research and Development Tax Incentive and expanding venture capital tax incentives. But productivity also rises when new ideas move from leading firms into everyday workplaces.

Australia’s AI adoption gap

Productivity can sound like a cold word: output divided by hours, the sort of phrase that sends even a diligent reader searching for the sports pages. Yet productivity is how living standards rise. It is how wages grow while inflation eases. It is how we fund better care and stronger schools. It is how families gain higher incomes and more choices.

Economic history is a history of spread. Electricity created value when factories reorganised around it. Computers created value when they changed design, logistics, jobs and communication. The internet created value when it reshaped commerce, public administration, education and daily life.

Artificial intelligence will follow the same pattern. The question is whether Australian workplaces can adopt it well.

Recent firm-level research from France finds that companies adopting AI are hiring more and selling more, including in occupations once thought vulnerable to automation.

The biggest employment risk may be working in a business that lags in adopting useful technology. In Australia, adoption remains uneven. At present, just 7 per cent of small and medium enterprises say they are making broad use of AI.

That should concern anyone who cares about living standards. Most Australians work in schools, hospitals, workshops and small businesses. An innovation policy focused chiefly on the most advanced firms will reach only part of the economy.

Why workers matter

Diffusion begins with workers. The people closest to the task often know where delays and frustrations occur. The nurse who sees where paperwork steals time, the mechanic who spots the recurring fault, the teacher who knows which digital tool improves learning, and the warehouse worker who understands the bottleneck: these workers are sources of innovation themselves.

Technology works best when it strengthens human judgement and extends expertise. That requires trust and voice. Better adoption means redesigning work with the people who understand it.

Skills are central. Training is sometimes treated as a repair shop for workers left behind by change. A better frame sees skills as economic infrastructure. They allow people to use new tools, move into better jobs, lift wages and bring fresh ideas into the workplace. Learning across a working life should become normal.

Mobility is vital. When workers can move more easily between jobs, ideas move too. Better employers attract talent. Poorer employers have to improve.

That is one reason the government is scrapping non-compete clauses for people earning less than $183,000. Knowledge moves faster when workers can carry it to better opportunities.

The challenge for small businesses

Small and medium businesses need practical support. A large firm can hire teams to experiment with AI or advanced equipment. A small business owner may be doing payroll on Tuesday, chasing invoices on Wednesday, serving customers on Thursday and discovering on Friday that the printer has joined a separatist movement.

Diffusion policy must meet firms where they are. That is why the budget makes the $20,000 instant asset write-off permanent, giving small businesses more certainty when they invest in the tools and technology that help lift productivity.

Government also has a role beyond regulation. Public institutions can test what works, spread practical lessons, support common standards and use procurement to encourage better systems. Government can help proven ideas travel.

The progressive case for productivity is simple. It is about investing in individuals, infrastructure and institutions so that growth serves human ends: higher wages, better services, safer work and wider opportunity.

Zero-till farming changed Australian agriculture because an idea travelled. Farmers tested it and adapted it. They shared it and improved it. The next productivity dividend will depend on whether we can do the same across the modern economy.

Australia should keep backing discovery. But the test of our innovation system is whether good ideas reach the people who can use them. That is how productivity becomes prosperity. That is the diffusion dividend.