A group of public servants in New South Wales has raised significant concerns regarding software and high-tech investments where the state is a customer, potentially signaling a broader impact on technology development in Australia. Their recommendation involves drastically devaluing the $1.6 billion invested in software development between 2011 and 2026, proposing that the asset base and associated fees be sharply reduced and eventually eliminated over the next eight years.
This move follows a request from public service officials in other Australian states and has raised fears of a wider national trend that could hinder technological progress. It comes amid broader challenges to tech investment, including Canberra’s recent capital gains tax policies, which some critics say undermine returns on innovation.
The controversy centers on Property Exchange Australia (PEXA), a company established to transform the property conveyancing process from a cumbersome, paper-based system into an electronic platform. Beginning in 2011, several states, including New South Wales, Victoria, Western Australia, and Queensland, together with major banks and private investors, invested approximately $500 million to develop this software. By 2019, the system was declared successful in Victoria and NSW, triggering a public float that valued the company at $1.6 billion, with the states and banks reportedly earning around $1 billion in profits.
PEXA subsequently secured over $1 billion in additional funding through loans and operational cash flow to expand the platform nationally. As a result, the property industry reported substantial cost reductions nationwide. The firm’s market capitalization peaked near $3 billion, and it is projected to achieve profits of roughly $150 million in the 2026-27 financial year, though it has yet to declare dividends.
The recent NSW public service review has sparked controversy by artificially separating capital outlays from operating expenses in software development, depreciating investments retrospectively, and ultimately valuing the company’s capital expenditure at just $368 million—about one-quarter of its public valuation in 2019. This valuation has formed the basis for setting fees that would consume a significant portion of PEXA’s projected profits, further delaying any shareholder dividends.
Public servants have indicated plans for a four-year review to potentially impose further reductions, with the goal of reducing the capital base and fees to zero by 2034. Critics argue this could drive PEXA to consider relocating operations outside NSW, possibly to other Australian states or even to the United Kingdom, where it currently maintains activities.
NSW Premier Chris Minns has expressed support for increasing the state’s role in high-tech development but indicates that these efforts have been overlooked. Meanwhile, industry observers warn that reverting to paper-based conveyancing could lead to lengthy legal disputes and undermine the substantial efficiency gains achieved through PEXA’s technology.
The situation illustrates ongoing tensions between government authorities’ approach to valuing and regulating technology investments and the expectations of investors seeking returns that reflect the risks involved. How this dispute unfolds may have significant implications for digital innovation and technology-driven service delivery across Australia’s property market and beyond.