The rise of artificial intelligence is “a moment of historic consequence” and digital skills are at the centre of the nation’s productivity agenda, Deputy Prime Minister Richard Marles proclaimed at last night’s launch of the 2025 ACS Australia’s Digital Pulse report at Canberra’s National Press Club.

Marles placed artificial intelligence alongside the printing press and the Industrial Revolution as historical turning points, saying “almost everyone in the economy now needs some form of skill to use this astonishing tool.”

As the government prepares for next month’s National Productivity Summit, Marles said that building Australia’s digital capabilities is the nation’s most significant micro economic reform challenge and “we will not climb the technological ladder unless we meet the fundamental challenges in cyber and AI.”

Digital Pulse, produced annually by Deloitte Access Economics for ACS, estimates the digital economy contributes $134 billion to Australia’s GDP and employs more than 1 million people, but highlighted significant shortfalls in digital capabilities across the broader workforce.

The Deputy Prime Minister described the report’s findings as a wake-up call.

While the digital economy plays a vital role in every sector, from defence to healthcare, the nation risks missing a $25 billion productivity uplift over the next decade without stronger investment in digital education and skills development.

“This report is at the centre of our national productivity challenge,” Marles said, adding that Australia’s economic transformation depends on how well the country adapts to these technologies, integrates them across industries, and prepares its people to work with them.

Bold reform calls

Joining Marles on stage, John O’Mahoney, partner at Deloitte Access Economics and lead author of the Digital Pulse report, described this year’s edition as the “bumper edition”—offering deeper analysis and stronger calls for reform.

“This year, we had to go bigger, broader, and bolder,” he said.

Key findings of this year’s report include:

  • 77 per cent of tech workers lack essential digital skills for their roles
  • 51 per cent of non-tech workers also report digital skills deficiencies
  • Over 150,000 businesses are experiencing severe or significant digital capability gaps

The 2025 release goes beyond workforce headcounts, O’Mahoney said, and examines the quality of skills, recommending a renewed focus on alternative pathways to grow Australia’s talent pipeline.

These include TAFE qualifications, industry certifications, and mid-career retraining.

“We’ve got the tech workers but do we have the skills?” O’Mahoney asked. “The answer lies in recognising and scaling up non-traditional entry points.”

He pointed to existing programs by Microsoft, AWS, CPA Australia, and Queensland TAFE that look to fill gaps in cybersecurity, AI, and cloud skills but said they must be better supported and widely adopted.

The case for sovereign AI

O'Mahoney also called for the creation of a national sovereign AI capability, warning trust in technology systems remains a barrier to innovation and uptake.

“We’ve got the ingredients but we’re just not baking the cake,” he said. “There’s no reason Australia shouldn’t be investing in sovereign AI infrastructure.”

The report argues Australia must develop its own national infrastructure, models, data and workforce strategy to maintain sovereignty in critical technology and compete internationally.

This aligns with growing momentum in other global economies.

O’Mahoney noted the timing of the launch comes as the US announces its AI Action Plan, and as Australia prepares for the National Productivity Summit.

Digital is everywhere

With Australians now using digital tools for an average of three hours a day, O’Mahoney stressed that digital capability is no longer a niche concern, but a core part of Australia’s social and economic fabric.

“Technology isn’t just a sector, it’s an enabler for every industry,” he said.

“From mining and manufacturing to retail and healthcare, digital skills are as essential as traditional literacy.”

Innovation and startup policy imperatives

Digital Pulse also renews its focus on innovation and startup policy.

It warns only 2 per cent of startup capital is directed to women-led ventures, despite 27 per cent of digital startups being founded by women – a gap that must be addressed through funding reform and ecosystem support.

Deputy Prime Minister Marles closed his address by congratulating ACS for producing a report he described as “a significant contribution” to national policy.

“This is fundamentally important work. It goes to the heart of our economic and social challenge.”