Australia’s biggest AI opportunity may lie not in building ever-larger language models, but in transforming manufacturing and industrial systems. Realising that potential will require investment in skills, research and access to computing power.

Another day, another existential threat to humanity.

The warning by frontier AI labs of an artificial super-intelligence may be a real one. Or it may be a cynical ploy to justify “regulatory capture” by these same AI labs, for whom the real threat is an increasingly precarious business model.

Whatever the case, it should not distract us here in Australia from the opportunities that might otherwise be missed. These opportunities are unlikely to be found in competition with US and Chinese large language models (LLMs), given the scale of investment required, though more specialised small language models are perfectly feasible here.

The transformative opportunities for “middle power” economies may instead lie in the application of AI to physical products and systems as a basis for new forms of competitive, high-value manufacturing. This is being termed “industrial AI”, and it provides a mechanism for addressing Australia’s productivity slowdown.

As we know from even the most optimistic Treasury forecasts, including the latest Intergenerational Report, productivity growth shows no signs of a significant uplift on current policy settings. This is because........

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