Is government helping or hindering Australia’s digital health market?

Australia’s digital health sector is increasingly confronting an uncomfortable question: when governments build digital health platforms or services that compete with private operators, are they solving market failures or distorting the market itself?

That question sat at the centre of a panel discussion at Digital Health Festival 2026 in Melbourne, where experts across competition policy, economics, law and government-funded healthcare debated whether Australia’s current regulatory settings are helping or hindering innovation.

The discussion revealed a far more complicated reality than either side of the debate often admits.

This article is based on the panel session Competition, Regulation and Sustainability in Australia’s Digital Health Market held at Digital Health Festival 2026 in Melbourne. Panellists included Emma Hossack (Chair), Stewart Plain, David Brown, Peter Leonard and Bettina McMahon.

The policy exists. The problem is enforcement

Stewart Plain, a competitive neutrality policy and complaints expert, outlined the framework designed to govern situations where government-funded entities operate in commercial markets.

Australia’s Competitive Neutrality policy, introduced by Commonwealth, state and territory governments in the 1990s, was designed to prevent government businesses from benefiting from structural advantages unavailable to private operators.

Those advantages can include:

• lower borrowing costs

• exemptions from taxes and charges

• the ability to absorb operational overheads within larger government agencies

Plain noted that the Australian Government’s cost of debt remains substantially lower than what is available to private firms, creating structural advantages worth hundreds of millions of dollars annually across government commercial activity.

In theory, government entities operating commercially are expected to identify those advantages, price their services accordingly and compete on equivalent terms with the private sector.

In practice, Plain argued, enforcement is inconsistent.

The policy is binding on government, but it relies on government agencies recognising for themselves that they are operating a business activity to which the policy applies,” he said.

“Many simply don’t make that call.”

Complaints mechanisms exist, but Plain argued they remain under-resourced, poorly understood and ultimately lack the authority to compel corrective action.

The result is a framework that appears coherent on paper but operates inconsistently in reality, particularly as government-funded organisations move further into software, data and consumer-facing digital health services.

Plain’s recommendation was direct.

“Government agencies operating significant business activities in digital health should be required to identify themselves in scope, quantify their advantages, and apply the policy,” he said.

“Making that determination shouldn’t be voluntary.”

Why digital health investment often fails to deliver 

David Brown, Head of the Department of Accounting at UTS Business School, shifted the discussion from regulation to a broader issue confronting both government and industry: why so many technology investments fail to deliver the productivity gains organisations expect.

The problem, Brown argued, is rarely the technology itself.

Too often, healthcare organisations invest heavily in new systems without redesigning the workflows, processes and business models surrounding them. The result is that technology becomes layered onto existing operational complexity rather than simplifying it.

Healthcare has a long history of expecting software alone to solve structural problems.

Brown argued the reality is far less straightforward.

He also highlighted another challenge particularly relevant to Australian digital health: innovators often carry the highest cost and risk, while later entrants benefit from lower development costs and lessons learned.

“That dynamic can be corrosive,” Brown said.

“It weakens the incentive for any firm to be the one that builds something new.”

Rather than simply calling for more investment, Brown suggested the sector may need more collaborative approaches to innovation, particularly around large systemic challenges that no single organisation can solve alone.

Data is becoming the real competition battleground

Competition and regulatory lawyer Peter Leonard offered one of the panel’s most commercially significant observations: the future of competition in digital health may have less to do with government funding advantages and far more to do with control of clinical data.

Who owns data, who can access it, who can train models on it, and who can be excluded from it are rapidly becoming defining questions for the sector.

Large platforms and government entities now control significant pools of healthcare data, creating growing concern among smaller operators and emerging innovators about whether meaningful competition will remain possible over time.

Leonard argued that many companies make the mistake of framing these concerns purely around commercial disadvantage.

Competition policy, he noted, is not designed to protect competitors. It exists to protect long-term consumer outcomes.

When industry takes a Competitive Neutrality concern to politicians, regulators or the ACCC, the mistake it most often makes is framing the argument in terms of its own ability to compete, rather than in terms of what consumers lose, over the long term, if innovative private firms are pushed out of the market,” Leonard said.

“Argue the consumer interest, and the rest of the case follows.”

Leonard also pointed to the Data Availability and Transparency Act as an example of reform that promised to improve data sharing but has struggled to gain practical traction.

Privacy Act overrides and the absence of a clear operational framework have limited the legislation’s effectiveness in practice.

With the Productivity Commission now recommending changes to streamline the regime, the panel suggested industry should engage with the process now rather than waiting until future policy settings become entrenched.

When government involvement is justified 

Bettina McMahon, Chief Executive Officer of Healthdirect Australia, offered a more nuanced counterpoint.

Government involvement in digital health, she argued, is not inherently inappropriate. In some cases, public investment exists because the private market has historically failed to provide equitable access to healthcare services at scale.

Healthdirect, for example, was designed to ensure Australians could access evidence-based clinical guidance regardless of location, income or existing healthcare relationships.

McMahon also pointed to growing concerns internationally around digital triage models and commercial healthcare platforms directing consumers toward preferred providers or pathways without transparency around commercial incentives.

A publicly accountable system, she argued, can help mitigate some of those risks.

At the same time, McMahon acknowledged government involvement should not exist indefinitely without review.

Markets evolve. Technology evolves. Consumer expectations evolve.

Policy settings, she argued, need to evolve alongside them.

She pointed to the former Australian Government Publishing Service as an example of a publicly funded service that was eventually wound down once the private market matured and digital delivery models became commercially viable.

“The same discipline needs to apply to digital health,” McMahon said.

“Governments should keep asking whether a service is still meeting a policy objective that the market cannot meet, and be willing to step back when it isn’t.”

What this means for Australia’s digital health market 

Across four very different perspectives, the panel ultimately converged on a similar conclusion: Australia already has much of the policy architecture needed to support both innovation and competition in digital health.

The greater challenge is applying those frameworks consistently, modernising data access settings and ensuring policy decisions remain focused on long-term patient and consumer outcomes rather than short-term market interests.

For digital health companies, the implications are becoming increasingly clear:

• build the economic case, not just the commercial complaint
• treat data access as a core competition issue
• engage early with policy processes before regulatory settings become entrenched

The future of Australia’s digital health market will not be shaped by innovation alone.

It will also be shaped by the policy decisions that determine who gets to compete, who gets access to data and ultimately who benefits from the next generation of healthcare technology.