Officials Warn of ‘Significant’ Cost to Upgrade Government Systems After AI Hack

By Rex Widerstrom
Rex Widerstrom
Rex Widerstrom
Rex Widerstrom is a New Zealand-based reporter with over 40 years of experience in media, including radio and print. He is currently a presenter for Hutt Radio.
October 27, 2026Updated: October 27, 2026

Australian officials have warned of “significant” costs to overhauling the federal government’s ageing computer systems after an OpenAI agent managed to hack the Medicare website in June.

Liberal Senator Jonathon Duniam also pressed Home Affairs officials at a Senate Estimates hearing on Oct. 27 on when the government’s old, unsupported systems would be secured.

Under a direction issued by Home Affairs, every agency must list its most critical systems by Dec. 31 this year, and all others by March 31 next year, along with a plan to shut down, protect, or replace them.

But Acting First Assistant Secretary Tim Neal said the job would never be finished, because technology from today will be outdated in the future.

“I don’t think we can stand up tomorrow and say to the people of Australia, ‘Oh, it’s going to be a work in progress forever,’” Duniam said.

Secretary Stephanie Foster said the most critical and vulnerable systems would be fixed first.

“It’s not going to be possible in a world of rapid technological change to say at point X everything’s perfect,” she said.

‘Significant’ Cost to Taxpayers

Duniam put to Head of National Security Hamish Hansford a reported estimate that replacing the systems could cost $15 billion to $17 billion (US$10.5 billion to US$12 billion).

Hansford said that was an example of a blunt approach, not a costing, but conceded “it’s going to be a significant figure.”

He said no one could guarantee against further attacks, adding that a threat report released that day by the Australian Signals Directorate, the government’s cyber security agency, showed AI was making attacks stronger.

No Access to AI Defence Tools: Home Affairs

Hansford also confirmed that Home Affairs does not have access to so-called frontier models, the most powerful AI systems, and said he did not believe it had asked for it.

Asked about OpenAI’s Daybreak cyber defence programme, he said: “Not in the Department of Home Affairs.”

Independent Senator David Pocock referred to an earlier committee hearing where Open AI’s Chief Strategy Officer Jason Kwon said it had given Daybreak access to several federal and state agencies, including Services Australia, and offered Australia $10 million (US$7 million) worth of credits.

Daybreak is an OpenAI program that gives approved cyber security teams access to its most advanced AI models to find and fix security weaknesses in their software and systems.

Foster said those were the agencies affected by the hack, and the Signals Directorate was coordinating which agencies got which tools.

“Why are we treating these companies like sovereign nations?” Pocock asked.

Minister Murray Watt said the government had made clear to OpenAI that what happened was unacceptable, and was taking action.

National Cyber Security Coordinator Lt. Gen. Michelle McGuinness said safely adopting new technology, including frontier AI, was a priority of the national cyber security strategy’s second stage, launched in June. Five of its 64 initiatives have been delivered so far.

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