OpenAI’s decision to establish its Australian headquarters in Sydney has sharpened focus on Victoria’s lag in attracting critical artificial intelligence investment. A recent Productivity Commission report estimated AI projects could add at least $116 billion to Australia’s GDP over the next decade, yet Sydney already has three times the number of data centres planned, in operation or under construction compared with Melbourne.
New South Wales has strengthened its lead by setting up a dedicated Office for AI, designed to modernise public services and encourage safe adoption of the technology. To critics, it is evidence that Victoria risks being left behind at a crucial time. The Australian Information Industry Association has urged the Allan Labor Government to consider its AI-first policy proposal, warning that Victorians are otherwise stuck with “clunky, disconnected systems” that fail to meet modern expectations.
Shadow Minister for Digital Transformation and Public Sector Innovation Brad Rowswell said the contrast should worry entrepreneurs. “NSW’s success is a kick in the guts for every entrepreneur hoping to build or grow an AI or tech business in Victoria.
“Victoria has the talent and potential to become Australia’s AI capital – it just needs to be backed by a government that recognises that potential.
“Only a Liberals and Nationals government will create the right environment for innovation, businesses and entrepreneurs to flourish.”
The Victorian Government, however, argues it is laying the groundwork for its own approach. The 2025–26 state budget included $14 million for two AI-related initiatives: an $11.1 million programme to digitise regulatory processes, replacing paper-heavy systems with faster approvals and licensing, and a pilot with Bendigo Kangan Institute of TAFE to improve recognition of prior learning through AI. Treasurer Jaclyn Symes said the aim was not to replace staff but to make government more efficient. “We’re not replacing humans with robots but we are certainly looking at efficiencies with technologies and ensuring that people can do their job as effectively as possible,” she said.
Victoria has also released a Data Reform Strategy that integrates advanced analytics, cloud and AI into decision-making, backed by new data hubs, training programmes and partnerships with universities. The state has adopted the national AI Assurance Framework and issued guidelines for responsible use of generative AI in the public sector, requiring agencies to ensure accountability, transparency and compliance with privacy and human rights law.
Alongside these steps, the Victorian Industry Policy unveiled this year places emerging technologies such as AI and quantum at the centre of its economic strategy, aiming to strengthen local industry and future-proof jobs.
For now, Sydney’s head start is undeniable. But Victoria’s measured approach signals a preference for embedding AI within broader reforms, seeking efficiency while maintaining safeguards. The debate between urgency and caution is likely to grow as billions of dollars in AI-driven opportunities take shape across the country.
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