Cracking the Code: The Challenges Facing (South) Australia’s AI Pioneers

South Australia led the nation when it established Australia’s first institute focused on artificial intelligence in 2017.

Earlier this year Michael Brown was appointed as Assistant Minister to the Premier for Artificial Intelligence (AI), Digital Economy and Defence and Space Industries.

Minister Brown was a logical choice.

A former IT professional, he served as the Chair of the Select Committee on Artificial Intelligence.

“There is global race to scale up and adopt AI, and we want South Australia to be at the forefront of this technology,” the government said when announcing his appointment.

“But there is more to do, and Assistant Minister Brown will work across government and with the private sector to secure South Australia’s AI advantage and ensure South Australia is harnessing all the benefits of AI.

“As well as transforming the way we work, AI has the potential to transform our economy by attracting investment, creating jobs and the companies of the future.”

But as the Select Committee on Artificial Intelligence stated in its final report, SA (and even Australia) can’t expect to compete head on with global superpowers.

As evidenced in many other areas of economic endeavour in small population settings, the key to success is to be strategic and niche.

The report stated: “Rather than be the proverbial 'Jack of all trades, master of none', the committee recommends that South Australia build a competitive advantage by identifying selected areas of AI to champion and develop world-leading levels of expertise in.”

It also identified the need to “develop a State Action Plan to market South Australia as the premier destination for AI investment in Australia, consider the introduction of a Growth Accelerator to accelerate the adoption of AI technologies in industry...”

The Investment Race

Whatever that focus might be, a recurring concern is need for greater government investment if Australia is to keep in touch with the rest of the world in AI research and development.

University of Adelaide professor and AIML Chief Scientist Anton van den Hengel told the Committee several years ago that AI “improves productivity 80% of the time and enables entirely new global business models. [Australia’s] focus on risk instead of opportunity has seen us slow to adopt AI and thus slow to capture its benefits.”

He said Australia was lagging behind countries similar to Australia in terms of AI investment.

‘Compared to most of the countries that we like to compare ourselves to, we have been very slow to make the transition,’ to an AI-enabled economy said Prof van den Hengel. ‘Canada has done a lot better than we have. They’ve just spent billions on this.’ ‘Singapore has just spent another billion and South Korea has spent billions as well,’ he said.

Now, in late 2025, that message is being amplified across a range of fronts.

Defence Minister Richard Marles addressed the National Press Club in July, to launch Deloitte’s Digital Pulse report, which observes: “Australian businesses are lagging behind other markets in AI adoption.”

Digital Pulse is produced for ACS, which highlighted the Minister’s remark that ‘building

Australia’s digital capabilities is the nation’s most significant micro economic reform challenge’.

The report calls on Government to:

• develop a national sovereign AI strategy.

• provide greater incentives for R&D in AI and tech adoption by business.

It acknowledges SA as “a hub for cyber security and defence technology research” and part of that is the School of Computer and Mathematical Sciences at the University of Adelaide.

Senior Lecturer Dr Tim Chen adds his voice to calls for Australia to do more.

“Other countries are ahead and if we don’t have the right infrastructure we might not be able to compete with them,” he said.

Dr Chen is an expert in human-AI interaction and extended reality.

He researches how to augment human capabilities by engineering human-centred AI systems in his role with AIML (Australian Institute for Machine Learning) at Lot Fourteen.

The institute collaborates with Defence companies and supports more than 35 South Australian businesses in developing AI-based products.

Dr Chen recently partnered with Saab Australia through the Defence Trailblazer Project to develop a strategic AI-powered planning tool for the Royal Australian Navy, aimed at enhancing defence readiness against hypersonic threats.

But without extra funding, the institute is fighting an uphill battle.

“I think the University sector has lots of excellent researchers with very capable knowledge,” said Tim.

“But we achieve that with a tragic amount of funding by our Federal government.

“We really punch above our weight.

“The industry really wants to collaborate with us but we hit a wall because we just don’t have the infrastructure to make it happen.”

AI and AUKUS

AI will play an increasingly important role in Australia’s AUKUS aspirations and for future shipbuilding in South Australia.

In a US Naval Institute article co-authored by Rear Admiral Todd S. Weeks in June this year, the country’s “shipbuilding crisis” was tackled in unflinching terms: “When it comes to solving the multifaceted crisis, one thing is certain: Attempting to answer it solely by piling more workers on the problem without replacing outdated manufacturing technologies is like slamming on the gas with one foot while keeping the other firmly on the brake.”

“… technological innovation requires a discussion of artificial intelligence (AI). Though this article is intentionally limited to near-at-hand, proven technologies, AI has many promising shipyard applications, and the Navy is already pursuing several via various pilot programs, including machine learning (ML) algorithms for analyzing complex shipyard datasets; large language models for generating repetitive, boilerplate text or work instructions; and algorithmic schedule generation. These programs will facilitate broader implementation as the technology matures.”

Global maritime design and engineering firm, BMT, offers a deeper insight into real world applications of AI. A report entitled AI in Design" by BMT’s Jake Rigby and Lee Hedd, different approaches being used in ship design.

“These include robotic process automation and neural networks for hull form design, as well as genetic algorithms for layout optimisation. These technologies demonstrate that AI is not just an abstract concept but a functional asset to ship design.”

According to Ridgby and Hedd, AI and ML will not replace naval architects.

“Instead, they should be seen as collaborative aids, enhancing human capability rather than substituting it. While ML can process vast amounts of information and quickly identify patterns, it lacks the nuanced judgment required to navigate the intricate trade-offs that define effective ship design. For example, deciding between competing priorities, such as structural weight and layout design, requires a level of human insight that no algorithm can fully replicate.

“In this context, AI tools in ship design serve as accelerators for solving specific, welldefined problems within the design space. These tools amplify the capabilities of human designers…”

Denis Morais, CEO of SSI, is careful to sperate AI hype from reality.

“It’s tempting to imagine AI as a solution that will “solve” shipbuilding’s challenges overnight,” he states.

“But the reality is more nuanced. AI is most effective in areas where data is already structured, consistent, and available at scale.

“Planning and scheduling are prime examples. These functions naturally generate structured data, making them ideal testbeds for AI. With the right foundation, AI can optimize sequencing, anticipate bottlenecks, and help decision-makers act faster and more confidently.

“Maintenance, repair, and operations (MRO) processes are another area where the payoff is clear. AI models trained on vessel imagery can detect corrosion, cracking, or wear – issues that human inspectors might not identify until much later.

“Similar technologies have already transformed industries like healthcare. In shipbuilding, the result is safer vessels, faster diagnostics, fewer surprises, and measurable returns.”

Ghost Shark

In September, the Royal Australian Navy awarded Anduril a A$1.7BN contract to deliver a fleet of Ghost Shark Extra Large Autonomous Underwater Vehicles (XL-AUV) over the next five years. The Ghost Sharks, manufactured in Australia, involve over forty sovereign Australian companies.

Last year, announcing that the first prototype was delivered a year ahead of schedule, Anduril noted it was “leveraging technology from its proprietary AUV capability and its Lattice AI-powered software platform to develop Ghost Shark”.

Anduril Industries has a strategic partnership with OpenAI. In the skies, it is using AI in counter-unmanned aircraft systems (CUAS) so “AI models can be leveraged to rapidly synthesize time-sensitive data, reduce the burden on human operators, and improve situational awareness”.

Lessons From Overseas

In the same month the State Government launched SA’s inaugural government Office for AI, US President Donald Trump declared: “From this day forward it’ll be a policy of the United States to do whatever it takes to lead the world in artificial intelligence.”

He’s also stated: “The United States must aggressively adopt AI within its Armed Forces if it is to maintain its global military preeminence”

While State Development says that SA has “the nation’s most concentrated pool of AI talent”, it won’t come as a surprise to Minister Brown that industry and academia are desperate for more funding to match the billion and trillion-dollar investment being made offshore.

“You do see Canada, the UK, the US and China have lots of investment for infrastructure for machine learning,” said Dr Chen.

“If you want to train those large models that are reliable, you really need a huge, huge data centre and unfortunately, Australia is lagging in that direction.”

Defence Minister Richard Marles addressed the National Press Club in July, when he launched Deloitte’s Digital Pulse report. The report is produced for ASC, which noted the Minister’s reference to ‘building Australia’s digital capabilities is the nation’s most significant micro economic reform challenge’.

The report acknowledges South Australia as “a hub for cyber security and defence technology research.”

It also calls on the federal Government to develop a national sovereign AI strategy and to provide greater incentives for R&D in AI and tech adoption by businesses.

AIML’s Role

AIML directs 70 per cent of its research towards medical advancements, with the remainder focussed on Defence in areas such as surveillance, autonomous systems and decision-making processes.

Surveillance

“In surveillance, AI is mostly used for system monitoring across different domains –land, sea, space even cyberspace,” said Dr Chen. “It can integrate data from drones, satellites and ground censors so it can deliver a live picture of the battle space. It can also automatically detect anomalies like unexpected vessels in waters or unusual troop movement which would take a lot of human resources if it didn’t have AI to help.”

Autonomous systems

“With autonomous systems, AI can power unmanned vehicles. We can do those things without putting our personnel at risk. They can adapt their roles, sometimes tactics and even missions without human intervention. We can design AI in a way that they are really the teammates of the human operators. They can adapt to local change and change their behaviour to reach the goal.”

Decision making

“In decision making, it cuts through the noise because nowadays we have so many sensors and a massive streaming of data and intelligence so how do you really extract useful knowledge from that flood of information to predict something like an adversary move?

“I always say with Defence, AI can see further, can act faster and decide smarter and all to protect human lives. Those are the things that AI can do very well.”

Defence and Ethics

Dr Chen said fears that AI could go rogue or replace humans are misguided.

“Many people are very concerned about this,” he said.

“Interestingly, I feel the people involved in Defence really care that the human must have the final say. It’s non-negotiable. Everyone is very serious about that.

“It’s all about augmenting the human, not about replacing them.

“AI will not replace commanders, it is there as an additional voice around the table to provide a suggestion but always the human makes the final call.”

Projects To Watch

• DEWC Services, the University of Adelaide and Defence Trailblazer are collaborating on a new research project focused on protecting container-based cloud environments. The project will leverage AI-driven security to create a system that can automatically adjust and defend against new and changing cyber threats. The team will explore Moving Target Defence (MTD) which disrupts adversarial attacks by continuously modifying the attack surface, making it harder for attackers to penetrate systems.

• Greenroom Robotics is a WA company that has received approval to export its AI software to the UK and United States, helping to fast-track AUKUS defence assets. Greenroom Robotics specialises in world-leading navigation and situational awareness software that converts any ship or boat into a fully autonomous, AI-enabled vessel.

• Computer Vision. In addressing the AI committee, Professor Simon Lucey, Director at the Australian Institute for Machine Learning, said SA has ‘strategically chosen certain pockets of AI to excel at’, using the example of computer vision, in which the state is classed as a global leader.

If you want to train those large models that are reliable, you really need a huge, huge data centre and unfortunately, Australia is lagging in that direction.