AI Engineer Demand Surges 34% Quarter-on-Quarter
The first quarter of 2026 confirmed what many in the Australian tech market suspected: AI engineering has moved from a niche discipline to a core hiring priority. Across Sydney, Melbourne, and Brisbane, demand for AI Engineers rose 34% compared to Q4 2025, making it the fastest-growing engineering category in the country. The surge is being driven by enterprise adoption of large language models, computer vision pipelines, and retrieval-augmented generation systems that require dedicated engineering talent rather than repurposed data scientists.
Companies that were previously content to outsource AI workloads are now building in-house teams. We saw a sharp uptick in permanent AI Engineer roles at Series B-and-above startups as well as at major financial institutions and telcos. The competition for candidates with production-grade ML infrastructure experience has pushed time-to-offer below two weeks at the most aggressive employers.
Software Engineering Salaries Stabilise
After two years of rapid salary inflation, base compensation for mid-level and senior software engineers has largely plateaued. The national average for software engineers sits around $121K, with Sydney averaging $127K -- roughly 16% above the national benchmark. Sydney senior engineers are sitting in the $160K-$205K band for permanent roles, while Melbourne remains approximately 10-15% lower at $110K-$135K for comparable positions. At the top end, companies like Atlassian and Canva are still paying $250K+ when stock is included, and AI, cyber, and cloud specialists continue to command a 20-30% premium over general software engineering roles.
The stabilisation is partly structural: engineering headcount growth has slowed relative to 2024, and companies are being more disciplined about levelling. Candidates who were previously able to negotiate significant premiums by leveraging multiple offers are finding fewer competing bids, particularly in traditional SaaS product companies.
Counter-Offer Trends Are Declining
One of the more notable shifts in Q1 was the continued softening of counter-offer effectiveness. According to SmartRecruiters' 2025 data, Australian candidates are roughly 5% less likely to accept offers than the global average, and many who do accept counter-offers from their current employer leave within months regardless. Organisations here also receive around 11% fewer applications per opening than the global average -- approximately 65 applicants per hire -- which means employers are more inclined to retain existing staff proactively rather than scramble at the resignation stage.
The era of the counter-offer arms race seems to be cooling. Employers are investing in retention earlier in the cycle rather than scrambling at the resignation stage.
Time-to-Hire Benchmarks
According to SmartRecruiters' 2025 benchmarks, Australia's median time-to-hire sits at 32 days from initial application to signed offer -- 16% faster than the global average. By contrast, the technology industry globally has a median of 48 days. Teams that leverage AI-driven hiring tools are moving even faster, hiring 26% (roughly 11 days) quicker than those relying on manual processes. Infrastructure and platform engineering roles remain the slowest, often due to multi-stage technical assessments and panel interviews that extend the process unnecessarily.
We continue to recommend that employers targeting high-demand candidates aim for a three-stage process completable within 10 business days. Every additional stage beyond three correlates with a measurable increase in candidate drop-off, particularly among passive candidates who are already employed and have limited availability for interviews.
What to Watch in Q2
- Expect continued growth in AI Engineer demand as enterprise LLM deployments move from proof-of-concept to production.
- Contract markets may tighten as several large transformation programs kick off mid-year.
- Watch for increased hiring in AI safety and responsible AI roles as regulatory frameworks solidify.
- Remote-first roles are declining in new postings but remain a strong candidate preference -- employers who offer flexibility will have an edge.