Having the ability to operate data centres and train frontier models would provide "critical mass to then enable sovereignty to become a reality, and to run things locally, sustainably", NAB group executive Peter Steel said on Friday.
The joint committee was also told the AI boom was unfairly tarnishing data centres that supported other critically important tasks.
Mr Steel described artificial intelligence as "arguably the most significant technology shift of our time" and called on the federal government to back incentives for AI education.
"It can definitely lift productivity and support higher living standards in Australia," he said.
"We believe Australia and businesses like ours have much to gain from establishing sovereign capability.
"That means helping Australian companies research, build, and scale commercially viable AI here, and nurturing an ecosystem that provides both resilience and opportunity."
Liberal frontbencher Andrew Hastie said developing AI capacity in Australia would help build a stronger nation.
"The argument that I want people to hear coming out of the committee is that we must have a sovereign AI capability here in Australia," he told ABC's Afternoon Briefing.
"The mission for the government, for the coalition, for anyone who wants a stronger Australia is to develop capacity here, and that way we can ensure that we keep up with the rest of the world.
"But also we have an AI capability that exists under Australian law and is ultimately accountable to the Australian people."
CDC Data Centres chief strategy officer Jack Dan said the company had found itself "front and centre" of the national conversation of AI.
"We've been around for 20 years, and for almost 20 years ... no one really cared," Mr Dan said.
"Part of that is driven by experiences overseas that potentially may not necessarily always reflect the specific regulatory settings in Australia. Part of that is, frankly, driven by bad behaviour."
Dr Dan did not reveal what "bad behaviour" he was referring to on the part of data centre operators, but said people had a right to be angry if their communities were slugged with rising electricity costs and water supply pressures.
"Doing infrastructure shouldn't be a trade-off to doing infrastructure well," he said.
CDC is part-owned by Australia's sovereign wealth fund and specialises in work for government agencies and universities.
It does not take on many private clients and is not involved in commercial generative AI.
The company said it welcomed the government's proposed national AI standards, which among other measures will force new data centres to offset their electricity consumption through renewable energy investment.
CDC has opted to sever ties with Australian AI firm Firmus, which on Friday sensationally canned its plans for what would have been the second-largest initial public offering in Australian history.
The two companies has been expected to collaborate on a network of renewable-powered AI "factories", known as Project Southgate, with the aim of boosting Australia's home-grown AI capacity.
CDC is no longer involved in Southgate, and Firmus' highly anticipated testimony to the federal AI inquiry was also cancelled on Thursday amid turmoil over its dumped IPO.
16°C