NEWS + VIEWS – 05/06/2026
MARKETS
Investors in the past week reacted to ongoing uncertainty around Iran and the Strait of Hormuz, which impacted oil prices and inflation expectations. At the same time, strong US economic data led markets to reconsider how quickly central banks might cut interest rates. Technology stocks were mixed, with enthusiasm for AI continuing to support some companies, while a sharp sell-off in semiconductor stocks after weaker-than-expected results from Broadcom weighed on sentiment later in the week.
In Australia, investors were focused on domestic inflation data, a weaker labour market and slowing economic growth, all of which increased expectations that the Reserve Bank may be less aggressive on interest rates. Consumer discretionary and technology sectors benefitted while energy and mining stocks were impacted by movements in oil and iron ore prices.
THE COST OF AI
Following the Australian Financial Review (AFR) AI Summit on Tuesday, the AFR expressed the view that while the world has spent the past few years focused on how to harness the potential of AI, the pace of technological advancements means that corporate leaders are now grappling with how they will afford its staggering costs.
Relatively cheap generative tools such as ChatGPT, which was launched only four years ago, are already being eclipsed by more complex, power-hungry models such as agentic AI, which act as independent digital helpers. An agent can complete multi-step workflows from start to end, such as auditing an entire database, flagging an invoicing error and emailing the supplier to fix the issue without human prompting.
The dilemma is that AI agents consume an exponential number of tokens, which are the units of data processed by AI models to count, read and write. It’s expensive because the cost is based on consumption. An unmonitored agent can burn through thousands of dollars of tokens trying to solve a single problem. Inevitably, that dilemma is fostering a scarcity mindset within companies, alongside the practice of ‘tokenomics’ as businesses seek to budget, monitor and optimise the cost of AI.
When it first burst onto the scene, AI captured the corporate imagination as a cost-effective and abundant resource that would revolutionise business operations. Tech Council of Australia chair and Atlassian co-founder Scott Farquhar told the Summit that two years ago, there were “no line items for tokens of large language models in a CFO’s budget, and now there can be $10 million or $100 million a year being spent on something that didn’t exist previously”.
Executives may find themselves trapped in an endless struggle to find the capital to continue paying for the advantages of AI in order to remain competitive. AirTree Venture’s co-founder Daniel Petre cautioned that the payoffs of AI may not turn out to be as large as first thought, pointing out that “higher margins and higher productivity over time could get whittled away through competition”.
Commonwealth Bank of Australia chief executive Matt Comyn urged the Summit to treat tokens like bank credit and allocate them only where they deliver genuine, productive and economic value. Another distinct theme at Tuesday’s Summit was the mounting anxiety about AI’s social licence to operate, given the looming job displacement, rapid rollout of energy-hungry data centres and big tech’s history of corporate impunity, such as tax evasion and data theft.
Google vice-president of global infrastructure Bikash Koley was keen to talk up the tech giant’s project to deploy air-cooled data centres in drought-prone regions to avoid guzzling up water reserves. Google is also pledging to fund and introduce new clean energy into the local ecosystem every time it builds digital infrastructure, such as the 25-megawatt solar farm nearing completion in the Riverina district of New South Wales.
Anthropic co-founder and chief science officer Jared Kaplan said the company which founded the Claude app is alert to the downsides of AI, from the cybersecurity risks emerging from the new Mythos model to the weaponisation of the technology by malicious actors. While it’s heartening to see big tech positioning itself as the ‘good neighbour’, the industry has historically resisted playing by the same rules as other businesses, such as Meta thumbing its nose at Australia’s News Media Bargaining Code.
Meanwhile, an unstable energy grid and regulatory bottlenecks continue to throttle the build out of data centres. Compounding this is Australia’s rigid copyright regime, which currently requires AI developers to secure individual licences before training models on local content. This is virtually impossible to do when dealing with millions of creators.
There are genuine concerns about safeguarding creative work, but it’s also important to find a sensible middle ground. At the Summit, Assistant Minister for Science and Technology Andrew Charlton vaunted Australia’s attractiveness as a data centre hub but sidestepped questions about the political lag in reforming copyright laws and providing certainty on the tax treatment of internationally owned data centres located here.
With the AI age still very much in its first innings and as companies continue to experiment with its usage, the federal government has a responsibility to get the regulatory settings right so that Australians can capture the full benefits of the technology. This includes fast tracking the energy infrastructure approval process, resolving the copyright impasse and dealing with taxation issues.
The failure of the political system to catch up could mean Australia risks missing the narrow opportunity window for AI investment and will directly contradict Charlton’s claim that “Australia has every ingredient needed to be a builder rather than a renter in the age of AI”.
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