Australia lags on AI governance as adoption races ahead

Australian organisations are adopting artificial intelligence faster than they are building the governance needed to manage it safely, according to SAP's latest global survey. Australia ranked below the worldwide average on AI governance readiness.

The research, conducted by Oxford Economics for SAP, surveyed more than 2,600 business leaders across 13 countries and identified a widening gap in Australia between AI uptake and the systems needed to oversee it. Only 22% of Australian organisations said they were mostly or fully ready in AI governance, compared with 33% globally.

AI now supports 29% of tasks in the average Australian business, up from 25% a year earlier. Leaders expect that figure to rise to 48% within two years, underscoring how quickly businesses see the technology spreading through day-to-day operations.

Spending is rising as well. Australian organisations expect to spend about AUD $35.5 million on AI this year, up from AUD $27.5 million last year, though still below the global average of AUD $40.4 million.

Expected returns are climbing alongside that investment. Australian companies forecast AI return on investment of 19% this year, up from 15% last year, with that figure expected to reach 37% within two years.

Governance gap

The survey suggests many businesses are struggling to keep control mechanisms in step with adoption. Some 42% of respondents said they were deploying AI agents faster than they could standardise and govern them, while 54% said employees were increasingly accepting AI outputs without enough scrutiny.

Operational issues are already emerging. The findings showed 43% of Australian organisations do not have human-in-the-loop processes for agentic workflows, and 49% said AI agents had already taken incorrect actions during pilots or deployment, usually leading to rework and delays.

Leadership arrangements also appear uneven. Fewer than half of the Australian companies surveyed had a dedicated AI leader responsible for adoption, while 33% had leadership key performance indicators tied to AI and 41% offered training on AI use and risk.

Angela Colantuono, president and managing director of SAP Australia and New Zealand, compared the country's progress to an incomplete report card.

"Think of this as Australia's AI school report: improving, but still not working to its potential," Colantuono said.

She said stronger controls would be needed as regulatory obligations increase and organisations expand AI use.

"With an estimated AU$150 billion of AI-related infrastructure investment promised over the next several years, Australia has a once-in-a-generation opportunity to turn AI confidence into national competitive advantage. But infrastructure alone won't get us there. And with multiple new AI obligations coming into play for Australia between now and the end of the year, driven by local and international regulation, organisations need to strengthen their data foundations, governance frameworks and leadership structures. Otherwise, we risk building the rails for an AI economy without being ready to run on them," Colantuono said.

Data constraints

Data quality emerged as another weak point. While 64% of Australian leaders ranked integrated data systems as the biggest enabler of AI readiness and 51% pointed to data quality, nearly three-quarters of organisations reported problems with poor data quality.

The share of businesses that consider themselves data-ready for AI has fallen since last year, the findings showed. At the same time, sovereign AI requirements are shaping deployment choices, with 99% of Australian organisations reporting some form of sovereign AI framework or requirement and 76% citing data residency constraints that limit model choice.

The research also highlighted a workforce challenge. More than four in five businesses said they were not convinced their upskilling efforts were keeping pace with AI's rapid evolution, while 77% reported that shadow AI occurs at least occasionally in their organisation.

Only 1% of leaders said AI would have no effect on workforce planning, indicating that executives broadly expect the technology to alter staffing, skills and job design.

Returns pressure

Agentic AI sits at the centre of many investment expectations. Businesses expect return on investment from agentic AI to reach AUD $21.2 million within two years, more than four times last year's estimate of AUD $4.4 million.

Even so, satisfaction with current returns does not always match performance. While 62% of Australian businesses said they were satisfied with their present AI return on investment, more than half also acknowledged that AI was still not reaching its full potential.

Professor Toby Walsh, scientia professor of artificial intelligence at UNSW's School of Computer Science and Engineering, said governance had to be linked to trust and understanding.

"Lack of understanding risks driving decisions by fear rather than evidence, and so closing the governance gap must start with closing the trust gap. Artificial intelligence is only valuable if people know when to trust it, and when to question it. Good governance shouldn't be viewed as slowing innovation. It's what allows organisations, employees and the broader community to adopt AI with confidence," Walsh said.

On adoption maturity, Australia is closer to the global average in generative AI than in agentic systems. Some 53% of organisations said they were scaling or leading in generative AI, close to the global average of 54%, but only 19% said the same for agentic AI, below the global figure of 24%.

The dominant pattern in Australia remains project-by-project deployment rather than broad business transformation, with organisations still more likely to apply AI within individual processes than through a coordinated company-wide strategy.

"These findings point to an urgent need for role-specific training, stronger safe-use guidance and change management that brings employees along as AI becomes embedded in daily work," Colantuono said.