When Australian Prime Minister Anthony Albanese meets US President Donald Trump on Monday, the visit is expected to seal major big tech investment deals on artificial intelligence (AI) and data centres.

In the lead-up, Atlassian cofounder Scott Farquhar (in his role as chair of the Tech Council of Australia) has been pitching a plan to make Australia a “regional AI hub”.

In July, Farquhar unveiled his vision in a speech at the National Press Club of Australia in which he held up Singapore and Estonia as proof that nimble regulation to attract foreign capital can turn nations into digital powerhouses.

But based on my research on the geopolitics of data-centre markets, these examples don’t quite hold up – and following them risks narrowing the debate about Australia’s tech future at a crucial moment.

However, as Australia advances its AI agenda, these examples can offer important lessons if read more carefully.

The Estonian data embassy

Farquhar proposes Australia should host “digital embassies”. These would be datacentres on Australian soil owned by foreign companies and exempt from Australian law. He cites as a precedent Estonia’s data embassy in Luxembourg.

Estonia’s case, though, is quite different from what Farquhar proposes. After a series of Russian cyberattacks in 2007, Estonia sought to guarantee the continuity of government if its domestic systems were ever disabled.

The result was a bilateral treaty with Luxembourg. The treaty allows encrypted copies of critical state registries – citizenship, land and business records – to be stored under Estonian jurisdiction abroad.

It was an act of defensive statecraft built on the Vienna Convention. This agreement grants diplomatic immunity to state functions but explicitly excludes commercial activity.

By contrast, the digital embassies proposed by Farquhar would cater both to states and to foreign corporates. It would allow them to operate under their own law but draw on Australian resources.

Farquhar himself concedes this would necessitate revising the Vienna Convention. But this would undermine six decades of established diplomatic practice and further destabilise an already fragile international system.

Without the diplomatic costume, Farquhar’s digital embassies look more like special economic zones. These are areas designed to attract investment through the strategic loosening of laws.

What really transformed Singapore

Farquhar’s reading of Singapore’s example similarly overlooks its deeper economic and political foundations.

Singapore is often romanticised by neoliberal thinkers as a haven of free enterprise. But Singapore’s success in using its natural strengths and foreign direct investment has rested on massive state-led investment and equity in infrastructure and firms.

Through its sovereign wealth funds, Temasek and GIC, Singapore retains dominant stakes in its airlines, banks, ports and telecoms. That same strategic state investment produced Changi Airport and the Jurong Industrial Estate, cornerstones of Singapore’s regional hub status.

Australia has taken a different path.

For example, recent Australian Tax Office data shows major technology firms – such as Amazon Web Services, Microsoft and Google – have secured billions in government contracts while contributing relatively little in tax.

In 2024, Microsoft reported $8.63 billion in Australian revenue, but only $118 million – about 1.4% – was payable in tax. Amazon Web Services earned $3.4 billion locally yet paid just $61 million after deductions reduced its taxable income to $204 million.

Much of this is explained by profit-shifting arrangements. Most revenue is booked in tax havens such as Ireland through inter-company “service fees”.

US tech companies have undoubtedly captured significant domestic value. However, local benefits, such as jobs, exportable digital industries and global competitiveness, remain largely hypothetical.

A cloudy memory

Australia has chased the dream of jurisdictional deregulation before.

More than a decade ago, Google and Microsoft told then prime minister Julia Gillard they could build a “Silicon Beach” here. This echoed Ireland’s “Silicon Docks” – a digital growth strategy of creating a deregulated haven for big tech.

Farquhar’s AI-hub vision appeals to the same logic. However, it has even thinner appreciation for the statecraft and public investment required.

Without it, Australia is unlikely to achieve AI hub status.

Some will argue Australia’s minerals and favorable relations with the US make it an inevitable frontier of data-centre expansion. Yet that position also gives Australia leverage to define sovereign growth on its own terms.

As economist Alison Pennington has asked, “is a shift from foreign-owned mining to foreign-owned data mining with even less control the best we can do?”

If Australia wants to build a resilient and credible AI sector, it won’t find its edge by joining the global race to the bottom – puncturing its territory with legal carve-outs and filling them with foreign-owned and unfettered direct investment.

Instead, Australia could build a model of sovereign control by investing in public infrastructure, skills and governance frameworks that secure national forms of ownership and accountability.

Angus Dowell, PhD Candidate, University of Auckland, Waipapa Taumata Rau

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Jeff Borland, The University of Melbourne

The rate of unemployment in Australia is on the rise again. Official labour force data released on Thursday shows that in the month to September, Australia’s seasonally adjusted unemployment rate jumped from 4.3% to 4.5%.

That’s the highest rate since November 2021. The surprise jump strengthens the case for the Reserve Bank of Australia to cut the official cash rate in November.

Back in November last year, the seasonally adjusted rate of unemployment was 3.9%. It has now been above 4% for ten consecutive months, and has only been going in one direction: up.

What could this mean for interest rates?

In its recent decisions, the Reserve Bank’s monetary policy board has jumped at any signs of higher price inflation. But it has retained a favourable outlook on labour market conditions.

In its most recent September decision, the board stated:

labour market conditions have been broadly steady in recent months and remain a little tight.

Such an outlook does not seem an option in light of today’s unemployment numbers.

The Reserve Bank has a full employment mandate to achieve “the maximum level of employment consistent with low and stable inflation”.

The mandate doesn’t put a specific numerical rate on this full employment goal. However, the rate of unemployment is now well above any credible estimate of full employment.

Employment growth is slowing

The reason why the rate of unemployment is rising is not hard to spot. Employment growth is slowing.

In 2024, my calculations based on the official labour force data show an average of 32,600 extra people became employed each month, compared with an extra 33,900 looking for work.

With growth in employment and the labour force relatively balanced, the rate of unemployment remained stable.

So far in 2025, each month only an average of 12,900 extra people have moved into employment.

The number of people looking for work has responded to the weaker labour market conditions, also growing less each month than in 2024, by 22,100 on average.

But unemployment is rising because the increase in the number of people looking for work in 2025 has been much bigger than the increase in employment.

A cooling jobs market

No matter which statistic you look at, my analysis of the official labour force data reveals the signs of a weakening labour market are clear to see.

Monthly hours worked grew on average by 0.27% each month in 2024, but only 0.04% so far in 2025.

In 2024, the total stock of jobs rose by 351,600. In the first six months of 2025, it grew by just 44,100.

And the proportion of people who have jobs, but want to work more hours, has increased from 9.9% to 10.4% since the end of 2024.

Government spending

The reason employment growth is slowing is not what might have been expected – but is even more worrying.

Since about mid-2021, employment growth in Australia has been propped up by a fast pace of job creation in what is known as the non-market sector, which consists of:

• health care and social assistance
• education and training
• public administration and safety.

That growth has come about as the federal government has pushed for improvements in the quality of government services, and expanded the National Disability Insurance Scheme (NDIS) and childcare services.

It has been expected for some time that eventually, the rate of increase in government spending on services would slow. That would in turn cause growth in non-market employment and total employment to slacken.

What’s really driving the trend?

However, that is not what has caused the slower employment growth in 2025.

In fact, today’s data release shows that growth in total hours worked in the non-market sector has continued at pretty much the same pace as in previous years.

Instead, the drop-off in total hours worked has been due to employment in the market sector declining.

Private employers are responding to what they see as weaker economic conditions, by reducing the rate at which they are adding new jobs.

This is a further undeniable sign of a weakening labour market.

Jeff Borland, Professor of Economics, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Christo Atanasov Kostov, IE University

The scenes have become grimly familiar: Russian tanks rolling into Georgia in 2008, the seizure of Crimea in 2014, the invasion of Ukraine in 2022, Russian military jets violating European airspace, and now mysterious drone sightings closing airports across Europe.

While these may seem like disconnected events, in reality they are but chapters in a singular, focused and evolving strategy. Russia’s aim is to wield military power when necessary, engage in “grey-zone” war tactics when possible, and exert political pressure everywhere. Moscow has been doing all this for decades, with one objective in mind: to redraw Europe’s security map without triggering direct war with Nato.

This goal is neither improvised nor ambiguous, and at its core, it is irredentist – it seeks to reverse Nato’s post-Cold War expansion, and reassert a Russian sphere of influence in Europe.

This singular focus was what governed Russia’s actions in the runup to its invasion of Ukraine. In December 2021, Moscow demanded that Nato bar Ukraine and Georgia from joining the alliance, and that Nato forces withdraw to their May 1997 positions, where they were before any former Soviet states in East Europe joined Nato.

This was not a diplomatic opening gambit to the February 2022 ground invasion, but an objective in and of itself. From the Kremlin’s perspective, Nato’s enlargement is both a humiliation and an existential threat, and must be curbed at all costs.

A toolkit of pressure

Russia’s actions can be variously interpreted as sabre-rattling, brinkmanship, or diplomatic pressure. In fact, all of these labels are accurate, but Russia uses them in conjunction to blur the typical lines between diplomacy, military action and domestic propaganda. We can break Moscow’s “toolkit” of pressure down into different types of action.

• Brinkmanship to force dialogue: Military escalation, from troop build-ups to the invasion of Ukraine itself, creates crises that compel Western attention. Russia manufactures emergencies to earn negotiation leverage, as it successfully did during the Cold War, and more recently in Georgia in 2008 and in Ukraine from 2014 onwards.
• Grey-zone probing: Drone and jet incursions over Germany, Estonia, Denmark and Norway are deliberate tests of Nato’s detection and response capacity. They also serve more the practical purpose of collecting intelligence on radar coverage and readiness without crossing into open hostilities.
• Hybrid pressure on smaller Nato allies: Cyberattacks and energy disruptions in various EU member states are designed to test the alliance’s solidarity. Moscow singles out smaller, weaker states to foster resentment and doubt within Nato.
• Domestic theatre: For Putin, confronting the West plays well at home. As Dmitry Medvedev, the Deputy Chairman of the Security Council of Russia, recently claimed, “Europe fears its own war”. For the Kremlin, that fear reinforces the narrative that Russia is the assertive power, and that the West is indecisive.

Russia’s use of these tools is not new – it builds on strategies that have been refined since the Soviet collapse. From Transnistria to Abkhazia, South Ossetia, and Donbas, Moscow sustains “unresolved” wars that lock states out of Nato and the EU, preserving Russian influence indefinitely.

Russia’s ‘permanent test’

Today, the Kremlin’s strategy increasingly favours hybrid means – drones, cyberattacks, disinformation, and energy blackmail – over warfare. These are not random provocations, but a coherent campaign of testing.

Each incursion and attack serves a diagnostic purpose: Can Europe detect? Can it coordinate a joint response? Can it enact this response swiftly and efficiently?

As Belgian officials admitted after a recent spate of drone sightings, the continent needs to “act faster” in building air-defence systems. Every such admission emboldens Moscow’s conviction that Europe is unprepared and divided.

Back home, these moments are curated into propaganda clips for state television, where pundits mock European “weakness” and frame the continent’s disarray as validation for the Kremlin’s confrontational stance. This manufactured crisis, in turn, is the latest application of a well-honed strategy.

With regard to the West, the aim is exhaustion, not conquest – a “permanent test” designed to drain resources and unity through constant, low-level pressure.

What comes next?

Russia’s escalating provocations of Nato and Europe cannot be maintained as status quo. As things stand, there are three possible scenarios for where they could lead us:

1. A new, long-term confrontation: This is the most likely outcome, as Nato cannot concede to Russia’s core demands without undermining its founding principles. Conflict would probably take the form of a drawn-out standoff: more troops on the alliance’s eastern flank, swelling defence budgets, and a new Iron Curtain across Europe.
2. The “Finlandisation” of Ukraine: One possible, though unstable, outcome could see Ukraine coerced into a neutral status – foreswearing Nato membership in exchange for guarantees as Finland did during the Cold War. From the West’s perspective, this would reward Moscow’s aggression, and entrench its veto over neighbours’ sovereignty.
3. Escalation through miscalculation: In a landscape of heightened tension, even a minor incident – a drone shootdown, a cyberattack gone wrong – could spiral into wider confrontation. A deliberate war between Nato and Russia is still improbable, but no longer unthinkable.

Europe’s imperative: resilience

The Kremlin’s approach relies on fragmentation; Europe’s answer must be cohesion. This means building up certain capabilities:

• Integrated air and missile defence: Build a truly continental shield, closing gaps that drones and hypersonic systems could exploit.
• Collective hybrid defence: Treat cyberattacks or drone incursions as alliance-wide challenges. A single, pre-agreed Nato response mechanism would deny Moscow the ability to isolate members.
• Technological and political autonomy: Invest in European defence industries, renewable energy independence, and resilient supply chains. Security now begins with self-sufficiency, especially in the face of wavering support from the US.
• Deterrence through diplomacy: Europe must combine credible military deterrence with pragmatic engagement, ensuring that channels of communication remain open to prevent escalation.

Russia’s strategy is not reactive, it is structural. The Kremlin seeks to force the West to accept a redrawn security order through a blend of coercion, probing, and perpetual testing. The tools may vary – from tanks to drones, from overt invasion to a hybrid war of attrition – but the aim endures: to undermine European unity and restore the sphere of influence lost by Russia in 1991.

Europe’s challenge is equally clear. It has to resist the fatigue of endless crisis and demonstrate that resilience, not fear, defines the continent’s future.

Moscow’s provocations will continue until the costs become prohibitive. Only a unified, prepared Europe can make that happen.

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Christo Atanasov Kostov, International Relations, Cold War, nationalism, Russian propaganda, IE University

This article is republished from The Conversation under a Creative Commons license. Read the original article.