Australia’s economic complexity has dipped. Here are 13 technological trends engineers could consider to help turn the country’s fortunes around.
Australia may boast an above-average GDP, but its economic complexity is waning.
The country is less complex than expected for its income level, according to Harvard Growth Lab’s Atlas of Economic Complexity, which tracks global trade flows across markets and identifies countries’ growth opportunities.
In 1998, Australia ranked 70th in the Atlas of Economic Complexity. But as of 2023, we’d dropped to 105th out of 145 countries.
In the eight years to 2033, Australia is set to grow 1 per cent annually, ranking in the bottom half of countries globally, according to the report.
Industrial machinery, and optical and medical apparatuses are among the sectors quoted as having the highest potential for new technological investment, to drive the country’s industrial diversification as part of this growth.
Topical tech
To turn the trough into a crest, Australian engineering companies might want to consider the 13 tech trends that matter most as we near 2026, according to the McKinsey Technology Trends Outlook 2025.
This report lists frontier technology trends deemed as having the greatest potential to transform global business. The assessments have been made based on scores for innovation (based on patents and research publications) and interest (based on news and web searches).
McKinsey also estimated the level of equity investments in relevant technologies and rated their level of adoption by organisations.
The higher the adoption score, the more scaled the technology is (a score of 1 meaning the technology is a frontier innovation, and 4 meaning it is fully scaled).
And the larger the circle, the greater the equity investment in said technology.
Some of the biggest jumps in innovation, investment and interest have been experienced in fields such as AI, future energy technologies and computer-related technologies such as semiconductors.
Attracting the highest interest from both researchers and users, AI “stands out not only as a powerful technology wave on its own, but also as a foundational amplifier of the other trends”, the report said.
Meanwhile, investment and interest in agentic AI, a phenomenon that has only become topical this year, is still burgeoning, with a $1.68 billion equity investment in 2024, compared to the $190.03 billion investment in AI more generally.
How about the Australian context? Theodoros Galanos, Generative AI Leader at Aurecon, said the best action engineers can take to make the most of new and emerging technologies such as agentic AI is to use them every day.
“That’s how integration happens,” he said. “That’s how companies can integrate an AI tool in their enterprise systems, or how individuals can do so at home. Engaging with the technology every day is the essential first step.”
He said generative AI, not AI generally, is the real technological shift.
“Generative AI is a very different beast. Every time someone talks only about AI, they’re misspecifying the whole discussion.
“There’s so much expertise in the engineering industry, so much knowledge and institutionalised tools and tasks. A culture of safety, reviews and compliance. It’s the perfect playground for applying generative AI, with its stochastic and non-deterministic nature. If we embed generative AI tools into our established workflows and bring in an engineer’s validation, that creates new and promising connections.
“It’s not about simply having a tool like Microsoft Copilot that you add to a business and suddenly transform everything. It’s about meaningfully engaging with that technology within your domain expertise.”
WATCH: How the most up-to-date tools – machine learning, data analytics, statistical modeling – are being used by engineers to craft software that achieves a practical impact
Here’s how innovation related to, and interest in the future of, energy and sustainability technologies expanded between 2020-24. This sector encompasses all manner of innovations aimed at transforming the global energy landscape towards a more sustainable and resilient future, focusing in particular on electrification and clean molecules.
Despite a dip in equity investment in this industry in 2023, it rebounded in 2024. Could this herald progress to come?
Where Australia ranks in making complex things
Words by Chloe Hava
Harvard’s Economic Complexity Index (ECI) tracks the diversity and sophistication of what nations make and export – a proxy for embedded know-how and value-added capability rather than sheer volume, according to Dr Jens Goennemann, Managing Director of the Advanced Manufacturing Growth Centre.
“Countries that possess the capability to add value, for example, to their commodities are more complex compared to those that export iron ore and coal, and have it processed or burned in other countries,” he said. “Australia exports a lot of iron, dirt and, along with it all, embedded carbon dioxide – placing us at a shameful yet deserved 105th place on the ECI.”
Australia is trailing far behind manufacturing leaders Germany, South Korea and Singapore, as well as mid-table players Chile and the United Arab Emirates.
“Germany is a manufacturing powerhouse, and that strength is underpinned by what they call the Mittelstand – mid-sized businesses that make parts or intermediate goods,” Goennemann said. “About 75 per cent of the world’s trade is in such unfinished goods.”
Germany’s Fraunhofer model, which has been in operation for more than 73 years, shows how long-lived, applied research crowds in private capital and lifts industrial capability.
“Funding is tripartite: one-third industry, one-third government, one-third academia,” Goennemann said. “Academia helps to improve a commercial idea, and government and industry underwrite a large pool of funds.”
This continuity of programs and policies underpins growth and signals to private markets that manufacturing is a critical national capability. And as a result, capital equity and institutional lenders back it.
The broader and more capable a country’s industrial base, the faster it can also pivot under shock – whether that be supply disruptions or pandemics – turning ideas into certified products, jobs and exports. That breadth underpins resilience and sovereign capability.
“Countries such as Australia that rank low on complexity are easy to beat when a cheaper source appears,” Goennemann said. “We can’t compete on cost; we have to compete on value to be globally competitive.”
In a nutshell, here’s what it will take for Australia to move up the ranks:
Scale the “missing middle”: Back the most capable SMEs to become mid-sized manufacturers through long-lived, industry-led programs.
Add value onshore: Process, assemble and certify resources here so more value and capability stay local, and Australia is harder to substitute in global supply chains.
Invest in applied commercialisation: Emulate durable tripartite models that translate R&D into certified, tradeable products and crowd-in private finance.
Policy certainty that unlocks finance: Continuity of programs and clear signals reduce risk and draw in banks and institutional lenders to fund equipment, skills and export growth.
Capability is also for shock response: A broad base of capable makers can pivot when supply chains choke. “Manufacturing capability is a long play,” Goennemann said. “But not one top-tier economy lacks it.”
This story was originally published in the November edition of create.
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