Australian Productivity Commission recommends major shift in technology regulation - implications for corporate strategy

On 5 August 2025, the Productivity Commission released its Interim Report on harnessing data and digital technologies. The report presents a regulatory vision that diverges significantly from recent government trends towards tighter compliance and control.

Tasked with identifying levers to boost Australia's economic productivity, the Commission has identified onerous regulation as a potential risk to economic growth. Consequently, the report advocates for a less interventionist approach, specifically regarding Artificial Intelligence (AI), data access, and privacy frameworks.

For business leaders, this signals a potential pivot in the regulatory environment. Below is an analysis of the four key proposals and their strategic implications for your organisation.

1. Re-evaluating Economy-Wide AI Regulation

Over the past year, the regulatory conversation has focused on introducing economy-wide mandatory guardrails for "high-risk" AI. The Productivity Commission is now recommending a pause on this initiative.

The Commission argues that introducing specific AI legislation on top of existing frameworks may create regulatory duplication and uncertainty, thereby hindering productivity. Instead, the report suggests that regulators should rely on existing laws and only introduce AI-specific regulation as a measure of last resort.

The Copyright Debate

A central component of this recommendation involves Generative AI and intellectual property. The Commission has proposed introducing a copyright exception for "text and data mining."

Currently, the legal status of training AI models on Australian data remains uncertain. The Commission suggests enabling technology companies to use copyright material for model training, provided the usage is "fair." This proposal conflicts with the position of creative industries, which argue that such an exception would result in uncompensated commercial use of their assets.

Strategic Implication: If adopted, this recommendation could make Australia a more attractive jurisdiction for AI development. However, organisations should anticipate continued friction between technology developers and rights holders.

2. Restructuring Data Access Frameworks

The Consumer Data Right (CDR)—the framework designed to facilitate data portability in banking and energy—is widely recognised as having high implementation costs.

The Commission acknowledges these implementation challenges and recommends developing simpler, lower-cost mechanisms to unlock data value in other sectors. The report highlights specific opportunities in:

• Agriculture: Sharing machinery and equipment data.

• Real Estate: Accessing rental ledgers.

• Retail: Leveraging loyalty program transaction history.

Rather than extending a complex government-mandated regime, the Commission proposes industry-led codes or standardised data transfer protocols to facilitate this exchange.

3. A Strategic Pivot on Privacy Reform

The report presents a substantial reconsideration of the proposed privacy law overhaul (commonly referred to as "Tranche 2"). The Productivity Commission suggests that certain proposed reforms may impose compliance costs on businesses that outweigh the benefits to consumers.

Two significant recommendations include:

• Omitting the "Right to Erasure": The Commission recommends against introducing a "right to be forgotten" similar to the GDPR, arguing that the compliance burden is disproportionate to the utility.

• Outcomes-Based Compliance: The report criticises the efficacy of complex privacy notices. It proposes an alternative compliance pathway where businesses demonstrate they have acted in the "best interests" of the consumer (a duty of care approach), rather than adhering strictly to prescriptive process requirements.

Strategic Implication: This introduces a degree of uncertainty into privacy compliance planning. While moving away from process-heavy compliance may increase efficiency, a "best interests" test can introduce legal ambiguity regarding what constitutes a duty of care.

4. Mandating Digital Financial Reporting

The report includes a practical recommendation impacting corporate reporting standards. The Commission advocates for amending the Corporations Act to mandate digital financial reporting.

The objective is to transition from static documents (such as PDFs) to machine-readable data to enable more efficient market analysis.

Strategic Implication: Reporting entities should prepare their finance and investor relations teams for a transition to data-centric reporting standards.

Key takeaway

The Productivity Commission is effectively asking the government to prioritise economic efficiency over expansive regulatory control.

If these recommendations are adopted, businesses can expect a lighter regulatory burden regarding AI and a revision of the more costly proposed privacy reforms. However, these remain recommendations and will likely face opposition from various stakeholders.

Next Steps

The deadline for submissions regarding this report is Monday, 15 September 2025. Organisations operating in AI, data aggregation, or sectors such as agriculture and retail should consider submitting a response to influence the final policy outcome.

Key internal stakeholders impacted:

• Chief Risk Officers

• Chief Data Officers

• AI Governance Committees