Australia lags peers in BCG’s ‘intelligent city’ index, but foundations in place
Global management consultancy Boston Consulting Group (BCG) has released its inaugural research index of the world’s most ‘intelligent cities’, with Australia’s metropolitan centres lagging behind their international peers.
Topped by London, the highest-ranked Australian capital on BCG’s ‘Intelligent Cities’ index for 2026, which focuses on the use of AI and digital capabilities to improve the living conditions of residents and serve businesses, was Sydney, which landed in at just 30th on the list.
Meanwhile, Melbourne was way down in 42nd place among the 61 large international cities in 39 countries assessed, behind Jakarta and just one spot above Delhi, with its ‘strategy’ and ‘outcomes’ still lingering in the ‘emerging’ category as compared to Sydney’s ‘accelerating’ status.
However, the Boston Consulting Group analysts determined that no single city led in every category or overall in more than one of the five weighted domains assessed, which along with strategy and outcomes included ‘adoption’, ‘ways of working’, and ‘enablers’ (together comprising 14 dimensions and 35 indicators), concluding that there were indeed multiples pathways to success.
Cities for example can elevate their maturity levels by balancing strengths across several dimensions, or by excelling in one particular area instead, while also not necessarily needing first-class infrastructure or deep funding ecosystems to start improving outcomes – such that the likes of Delhi and São Paulo can boost themselves into the same overall ranking bracket as Melbourne.
Yet, one aspect in the development of intelligent cities stood out: AI. According to BCG, cities that are embedding AI into core public services and daily city operations are delivering faster, better outcomes for residents. Here, the firm says, striving for more AI use cases is a key pillar to lifting overall maturity, as the increased satisfaction from more tech usage creates a ‘virtuous circle’.
As per the firm; “A virtuous circle forms in a setting where residents feel strongly about what AI means for their well-being. When residents feel good about how AI is serving them, city leaders have an opening to enable AI more fully and provide more value to beneficiaries. This value feeds more optimism, which is a driver of more engagement, innovation, scaling, and on and on.”
Notably though, Sydney stands out as a leading adopter alongside eighth-ranked Shanghai in having the greatest number of AI use cases among the cities assessed but registering relatively low on outcomes scale, suggesting the potential to quickly move up the overall table should usage increase. Yet, a recent ‘AI sentiment’ survey by Ernst & Young placed Australia at the very bottom of the list.
In an abstract way, the opposite of a virtuous circle could be considered the proverbial chicken and egg. The research also found that satisfaction rose in tandem with smart city app usage, along with a strong correlation between how frequently residents used AI tools and how positive they felt about the technology and its future benefits, both of which skewed towards younger demographics.
Sydney, which sits among the cities with less than 30 percent of its population under the age of 35, was also assessed as having a rather mediocre ‘soft-enabler’ score, that is, a relative (and surprising) deficit in funding, talent, and ecosystems to drive progress, but was still considered ‘balanced’ due to performing quite well in the ‘hard’ enabler indicators as to data, infrastructure, and deployment.
All put together, Sydney was the only city ultimately graded to be ‘accelerating’ across every domain (outside of the top dozen or so which were either accelerating or deemed leaders in each). The take-home message is probably that the city is perfectly poised to shoot up the list, if only it can better encourage more of its people to adopt its digital offerings or somehow reduce rental costs.
“Given today’s rapid pace of change and evolving resident expectations, building a city’s intelligent foundation, paired with focused improvement across enablers requires urgency,” concludes BCG partner and report co-author Rami Mourtada. “But city leaders and business partners don’t need to try to do everything all at once; it’s a longer-term horizon and there is no single pathway forward.”
