Productivity Commission AI Report: What It Means for SMEs
The Productivity Commission says AI could add $116 billion to Australia's GDP over the next decade. That is not a typo. And it is not buried in some academic paper that nobody reads. It is the headline finding of a major government inquiry that received over 700 submissions and will shape Australian AI policy for years to come.
The problem? Every article about this report is written for lawyers, economists, and policy advisors. If you run a business with 5 to 200 staff, you are left wading through 400 pages of government prose trying to figure out what actually matters for you.
This is the plain-English version. We have read the full report so you do not have to. Here is what the Productivity Commission actually said, what the five recommendations mean for your business, and what you should be doing about it now.
What Is This Report, and Why Should You Care?
The Productivity Commission is the Australian Government's independent research and advisory body on economic, social, and environmental issues. When the government wants serious, evidence-based advice on how to make the economy work better, it asks the Productivity Commission.
In this case, the Treasurer asked them to look at how Australia can better harness data and digital technology. The result is Inquiry Report No. 111, "Harnessing Data and Digital Technology," published in December 2025. It covers AI, data sharing, digital infrastructure, and the regulatory framework around all of it.
You should care because this report will directly influence the laws and regulations your business operates under. The Commission's recommendations carry real weight. When they say "do not regulate AI for the sake of it" or "make privacy outcomes-based," the government listens. Australia's productivity growth in the decade to 2020 was the slowest in 60 years. The government is motivated to get this right.
The Numbers That Matter
The report models several scenarios for how AI could affect the Australian economy. Here are the key figures.
High-adoption scenario (4.3% labour productivity growth)
$116 billion added to GDP over the next decade
Conservative scenario (0.5% productivity growth)
$26 billion added to GDP over the next decade
AI adoption rate
68% of Australian businesses had adopted AI by March 2023
Public engagement
Over 700 submissions received during the inquiry
The 5 Recommendations, Explained for Business Owners
The report makes five key recommendations. Here is what each one actually says, and what it means if you are running a business.
Recommendation 1: Use Existing Laws First, Regulate AI Last
The Commission recommends that AI-specific regulation should only be introduced as a "last resort." Existing laws covering consumer protection, anti-discrimination, privacy, and workplace safety already apply to AI systems. New rules should only come in where there are genuine gaps.
What it means for your business: This is good news if you are already running your business within the law. You do not need to wait for a special "AI licence" or new compliance framework before adopting AI tools. If your AI use complies with existing consumer, privacy, and workplace laws, you are on solid ground. The Commission is telling the government not to pile on new red tape for its own sake.
Recommendation 2: Copyright: No Changes Yet, Monitor for 3 Years
The Commission recommends against changing copyright law right now to address AI training on copyrighted material. Instead, the government should monitor developments for three years and revisit the question.
What it means for your business: If you are using AI tools like ChatGPT, Claude, or image generators, you are not at legal risk from the copyright angle right now. The Commission found that rushing to legislate could do more harm than good. But this is a watch-this-space situation. If you are creating content with AI, keep records of your process so you can demonstrate originality if questions arise later.
Recommendation 3: Simplify the Consumer Data Right
The Consumer Data Right (CDR) was meant to let consumers share their data between providers easily. Think switching banks or energy providers. The Commission found it has become too complex and expensive, especially for smaller businesses. They recommend simplifying it and lowering the cost of participation.
What it means for your business: If you are in banking, energy, or telecommunications, you may have already dealt with CDR compliance headaches. Simplification could lower your costs and make it easier for new entrants. For other industries, this signals that when CDR eventually expands to your sector, the framework should be more practical than the current version.
Recommendation 4: Outcomes-Based Privacy, Not Tick-Box Compliance
The Commission recommends replacing the current prescriptive privacy approach with an outcomes-based "fair and reasonable" duty. Instead of following a checklist, organisations would need to demonstrate that their data handling is genuinely fair and reasonable in the circumstances.
What it means for your business: This is a significant shift. Instead of ticking boxes on a compliance form, you will need to show that what you are actually doing with customer data is reasonable. For many SMEs, this is simpler in practice. You do not need a 40-page privacy policy. You need to be able to explain, in plain language, what data you collect, why, and how you protect it. The flip side: "We followed the checklist" is no longer a defence if your practices are clearly unreasonable.
Recommendation 5: Digital Financial Reporting Becomes Mandatory
The Commission recommends mandatory digital financial reporting using standardised formats. This means businesses will eventually need to submit financial reports in machine-readable formats rather than PDFs or paper.
What it means for your business: If you are still doing your BAS on paper or sending PDF financial statements, this is your heads-up. The shift to digital reporting will happen over time, not overnight. But it is worth talking to your accountant or bookkeeper now about ensuring your accounting software can export in standardised digital formats. If you are already using Xero or MYOB, you are likely most of the way there.
Real Australian Examples from the Report
The Commission did not just deal in theory. The report includes concrete examples of Australian organisations already seeing results from AI.
Commonwealth Bank
30% reduction in customer-reported fraud
CBA uses AI to detect and prevent fraudulent transactions in real time, resulting in a 30% reduction in customer-reported fraud.
Telstra
20% reduction in follow-up service calls
Telstra deployed AI to improve first-call resolution in customer service, cutting follow-up calls by 20%.
Predictive maintenance (across industries)
30-40% reduction in downtime
Australian businesses using AI for predictive maintenance report 30-40% less unplanned downtime and 20-30% lower maintenance costs.
These are not startups burning through venture capital. They are established Australian businesses using AI to solve practical problems: reducing fraud, improving customer service, and cutting operational costs. The report makes it clear that AI is not a future consideration. It is delivering measurable results now.
What Should Your Business Do Now?
Stop waiting for permission. The Commission's strongest message is that existing laws already cover most AI risks. You do not need new legislation to start using AI responsibly. If you have been holding off because you are worried about regulatory uncertainty, the Commission is telling you the guardrails are already in place.
Prepare for outcomes-based privacy. The shift from tick-box compliance to an outcomes-based approach means you need to be able to explain and justify your data practices. Start by documenting what customer data you collect, why, and how you protect it. If you cannot explain it simply, simplify your practices.
Talk to your accountant about digital reporting. Mandatory digital financial reporting is coming. If you are still relying on manual processes or PDFs, start the conversation with your accountant about migrating to software that supports standardised digital formats.
Document your AI use. Keep a record of what AI tools your business uses, what data they access, and what decisions they inform. This is good practice now and will be expected practice as the regulatory environment matures.
Focus on the opportunity, not just the risk. The Commission's report is fundamentally optimistic about AI. The $116 billion figure is an opportunity number, not a risk number. Businesses that adopt AI thoughtfully and early will capture a disproportionate share of that value.
Source: Productivity Commission 2025, Harnessing data and digital technology, Inquiry report no. 111, Canberra.
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Learn about the AI Readiness ReviewFrequently Asked Questions
What is the Productivity Commission AI report?
The Productivity Commission's "Harnessing Data and Digital Technology" report (Inquiry Report No. 111, December 2025) examines how Australia can better use data and digital technology, including AI, to boost productivity. It received over 700 submissions and makes five key recommendations covering AI regulation, copyright, consumer data, privacy reform, and digital financial reporting.
How much could AI add to Australia's GDP?
The Commission estimates AI could add $116 billion to Australia's GDP over the next decade under a high-adoption scenario with 4.3% labour productivity growth. Even the conservative scenario of 0.5% productivity growth would add $26 billion.
Will there be new AI-specific regulations in Australia?
The Commission recommends against AI-specific regulation as a first response. Recommendation 1.2 states that AI-specific rules should be a "last resort," with existing consumer protection, privacy, anti-discrimination, and workplace laws covering most AI risks. New regulation should only fill genuine gaps.
Do I need to change how my business uses AI based on this report?
Not immediately. The report's recommendations are directed at government, not businesses. However, the direction is clear: outcomes-based privacy, digital reporting, and a preference for existing legal frameworks. Smart businesses will start preparing now, especially for the shift to outcomes-based privacy and digital financial reporting.
What percentage of Australian businesses use AI?
According to the report, 68% of Australian businesses had adopted some form of AI by March 2023. This figure has likely grown since then, driven by the widespread availability of generative AI tools.