New Zealand faces widening innovation gap, TUANZ warns

The Technology Users Association of New Zealand has released its 2026 Digital Priorities Report, which warns that New Zealand faces a widening innovation gap.

The sixth report in the series was produced with One NZ and draws on interviews with nearly 30 chief information officers and chief technology officers from large companies and public sector organisations across the country.

Its central finding is that New Zealand's digital progress has stalled despite strong fibre infrastructure and what it describes as sound digital governance. Surveyed technology leaders rated overall progress at six out of 10, suggesting adoption has flattened while other countries move faster.

AI shifts

Organisations are changing how they use artificial intelligence. Rather than focusing on trials and isolated experiments, many are applying AI to practical, repeatable tasks within existing systems, with a sharper focus on returns.

That shift is also creating pressure in the labour market. TUANZ says the spread of AI across large organisations is deepening shortages in specialist technology roles and changing how employers approach training and skills development.

Senior technology executives also highlighted what the report calls a "ladder-pulling" effect. As AI takes over entry-level work often used to train junior staff, companies could weaken the pipeline for future talent.

"AI is no longer a future concept, it's operational today in many large businesses around Aotearoa," said Craig Young, chief executive of TUANZ.

"But while it acts as a powerful workforce multiplier, it is also intensifying the deep-tech talent shortage and reshaping how skills are developed."

Security pressure

The report also points to rising concern over "Shadow AI", the use of unsanctioned AI tools inside organisations. It links the trend to recent data breaches and says companies need to treat AI systems like digital employees operating under strict zero-trust security rules.

Cybersecurity risks are a broader theme across the findings. Nearly half of large businesses said they had suffered a cyberattack in the past year, while AI-led social engineering methods such as deepfakes and voice cloning are becoming harder to detect.

Adrian Albuquerque, chief information officer at One NZ, said technology teams are trying to balance cost discipline with the need to keep investing in new tools.

"Digital transformation is a key enabler for many organisations. However, in a cost-constrained environment, many technology teams are grappling with how to drive value while also investing in new capabilities and tools. Strategic deployment of AI is imperative for New Zealand to continue maturing our digital economy."

Cost strains

Economic pressure is also reshaping technology strategy. Rising software licence fees and cloud spending are pushing organisations away from a "cloud-first" stance and towards a more selective "cloud-smart" approach.

Data quality remains another obstacle. Fragmented and poor data sets are still holding back digital transformation efforts, even as businesses try to make wider use of AI and automation.

Global ranking

New Zealand's international position has also weakened. The country fell to 23rd place in the 2025 Network Readiness Index, despite retaining strengths in areas including eCommerce regulation and inclusive governance.

That mixed picture suggests a country with solid foundations but uneven uptake. While institutional settings remain relatively strong, New Zealand lags in individual digital usage and continues to face sustained cybersecurity threats.

Albuquerque said the security challenge has become relentless for both telecoms operators and their customers.

"As New Zealand's telco, our internal teams and customers are fighting what feels like a constant 'whack a mole' within our current cybersecurity reality. AI tools are both helpful and a hindrance when it comes to scams and fraud, and it can feel like a never-ending battle to stay ahead of sophisticated bad actors. To better tackle this growing issue, organisations must adopt an identity-first, zero-trust approach, and government must step up with consistent, mandatory cybersecurity and data protection standards."

Policy asks

TUANZ is calling for a stronger national response. Its recommendations include mandatory cybersecurity standards, a national digital clearing house to vet global technology suppliers, government-led workforce programmes to build AI skills, faster progress on a secure digital identity framework, and recognition of data platforms as critical national infrastructure.

Young said New Zealand still has the basic ingredients needed to compete if leaders act quickly.

"New Zealand has the foundations to succeed, but without decisive action, we risk falling further behind.

"This is a moment for bold leadership, to stabilise businesses, invest in people, and build the governance frameworks needed for a high-productivity digital future."