Abstract

The Productivity Commission’s (PC) draft proposal in its August 2025 interim report to create a fair dealing exception for Text and Data Mining (TDM Exception) has been rejected by the Australian Government. This measure was proposed to facilitate the training of Artificial Intelligence (AI) models, which require “vast quantities of data,” including copyrighted material, and was argued to be crucial for driving innovation. However, the proposal triggered a firestorm of criticism from rights holders – including musicians, publishers, visual artists, and authors – who viewed it as a blueprint for theft and an unjust transfer of property rights to mostly foreign big tech companies. 

Our view is that a TDM exception is both impracticable and undesirable, and would be unenforceable due to the lack of transparency from AI operators. We have argued for microeconomic reform, developing and strengthening streamlined markets based on licensing, and leveraging collecting societies to ensure creators receive fair remuneration and legal certainty. This market-based approach has now been validated. Now the challenge is to establish paid collective licensing frameworks to suit the AI age, and improve mechanisms for enforcement of existing rights.

Policy Flashpoint: A Proposed TDM Exception 

The Australian Government’s recent inquiry into the intersection of Artificial Intelligence (AI) and copyright law reached a critical turning point with the release of the Productivity Commission’s (PC) interim report, “Harnessing data and digital technology,” in August 2025. The report became a policy flashpoint by proposing a controversial amendment to the Copyright Act: the introduction of a new ‘fair dealing’ exception for Text and Data Mining (TDM).

The TDM exception, as proposed by the PC, was designed to facilitate the training of AI models by allowing copyrighted material to be used without the need for licensing or permission. The Commission intended for this exception to be technologically neutral, applying broadly to all forms of machine-based analytical techniques used to identify patterns and trends, not solely to AI development.

This proposal immediately crystallized a core tension in Australia’s digital policy. On one side, the Productivity Commission argued that such an exception was essential for boosting Australia’s productivity and innovation in the global AI race. On the other hand, the proposal triggered what was described as a “firestorm of criticism” from Australia’s creative industries, who viewed it as a direct threat to their intellectual property rights and economic viability. 

Our view

Our view was that implementation of a TDM exception was both impracticable and undesirable.

While framed as a move to foster innovation, the TDM proposal was misguided and inequitable. It overlooked the established principles of copyright, the demonstrated behaviour of AI developers, and the practical issues of enforcement.

More fundamentally, a TDM exception is a solution to the wrong problem. The problem is not simply that AI platforms need more access to copyright resources, and therefore should be granted this access. The real problem is how to develop institutional and technological arrangements that support a long-term market solution to the AI platforms’ need for training content, but in a way that maintains incentives for investment in creative content. In short, the real issue is one of microeconomic reform. (For full details, see our submission to the Productivity Commission’s inquiry, “Promoting microeconomic reform for a sustainable AI ecosystem”.)

The Government’s Final Decision: Rejecting the TDM Exception

On October 26, 2025, the Albanese Government announced its final policy decision, authoritatively rejecting the Productivity Commission’s proposal for a TDM exception.

In a clear and decisive statement, Attorney-General Michelle Rowland articulated the government’s official rationale. She affirmed that the government “stands behind Australia’s creative industries” and is committed to ensuring “Australian creatives benefit from these opportunities.” Critically, she stated, “there are no plans to weaken copyright protections when it comes to AI.”

The government explained that the decision was made to provide “certainty to Australian creators” and to explicitly reject a framework that would allow AI developers to “use the works of Australian creators for free and without permission to train AI systems.” This move effectively ended the debate over the TDM exception and shifted the policy focus from expropriation to collaboration.

Sector Implications and The Path Forward

The government’s decision has reset the strategic landscape for both the creative and technology sectors. It ended a period of significant uncertainty and defined the future terms of engagement for AI development in Australia, charting a course based on market principles rather than statutory exception.

Implications for Australia’s Creative Industries

For Australia’s creative and media sectors, the decision represents a landmark victory for creators’ rights. Industry leaders welcomed the announcement as a validation of their central role in the nation’s culture and economy.

• News Corp’s Michael Miller stated that the decision secures a “sustainable and thriving future” for Australian culture and news media by upholding the creator’s fundamental right to control access and payment for their work.
• ARIA’s Annabelle Herd praised the government, saying it “has taken a stand and backed in copyright.” She affirmed that the existing legal framework is “fit for purpose” to facilitate licensing negotiations.
• The Australian Society of Authors’ Lucy Hayward reinforced the sector’s relief, while also signaling the next front in the debate by calling for a mandatory code of conduct to counter ‘profoundly unequal bargaining power between individual creators and big tech.’

ARIA in particular pointed to emerging examples of successful licensing deals, arguing that they demonstrated the effectiveness of existing commercial approaches to solving the issues of content access and creator compensation.

A New Framework for the Technology Sector

For the technology sector, the government’s decision marks a clear pivot away from a model of free data access towards a different, market-based innovation framework. While acknowledging the sector’s arguments for an exception, the government has directed it toward negotiation and partnership.

The new directive was articulated in the government’s call for the tech and creative sectors to “come together and find sensible and workable solutions.” Instead of a broad legal exception, the primary path to accessing high-quality Australian training data will be through licensing agreements – a model advocated for by opponents of the TDM proposal and evidenced by emerging market solutions.

Future Policy Priorities: The Copyright and AI Reference Group

Looking ahead, the government has tasked its Copyright and AI Reference Group (CAIRG) with examining three priority areas to build a modern and effective copyright system for the AI era:

1. Licensing Frameworks: The group will examine whether Australia should establish a new paid collective licensing framework under the Copyright Act or maintain the status quo of encouraging voluntary licensing agreements between parties.
2. AI-Generated Material: The group will explore opportunities to clarify or update copyright law as it applies to content created using AI, addressing questions of authorship and ownership.
3. Copyright Enforcement: To make it easier for creators to protect their rights, the group will investigate the potential for a new small claims forum to efficiently and affordably address lower-value copyright infringements.

This forward-looking agenda signals the government’s intent to actively shape the market mechanisms needed for a sustainable AI ecosystem. This is the correct approach – treating the challenge of content access as a process of microeconomic reform that “lifts all boats”, not as a zero-sum transfer of content ownership rights.

Of course, such processes  do not always run smoothly, as the history of the News Media Bargaining Code shows. However, pressure is building on the technology industries to behave like a part of a wider context ecosystem, and to respect the rights of others.

Why This Matters: A Firm Commitment to a Market-Based AI Ecosystem

After a period of intense national debate, the Australian government has decisively opted to protect existing intellectual property rights over creating a broad, AI-specific copyright exception. 

This decision represents a strategic pivot away from regulatory subsidy for the technology sector and towards a principled commitment to a market-based AI ecosystem built on transparent licensing solutions rather than the uncompensated expropriation of creative works.

The key challenge ahead is for Australia’s creative and technology sectors, guided by the government, to build the transparent and efficient licensing frameworks necessary to power Australian innovation. The goal now is a future where technological advancement and creative vitality are mutually reinforcing, ensuring that creators are fairly compensated for the fundamental value their work provides to the digital economy.

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