The Australian IT talent market has changed shape several times since 2020. The May 2026 picture is different again and worth a working read because the hiring decisions made in the next two quarters will define a lot of 2027 delivery capacity.

Three things are true about the talent market right now:

Junior and graduate hiring is the most competitive it has been in five years. The graduate intakes for CS and adjacent disciplines from 2024 and 2025 have been smaller than the 2019–22 intakes for reasons that are mostly outside the tech industry’s control — overseas student composition, course program changes, broader economic conditions. The result in mid-2026 is that strong graduates and one-to-three-year experienced engineers are being competed for hard by the big consultancies, the banks, and the better-funded scale-ups.

Mid-level engineering hiring is softer than it was 18 months ago. The four-to-eight-year experience band — senior engineers and emerging tech leads — has more candidates available in May 2026 than there were in late 2024. Some of that is the maturing of cohorts who were hired heavily through the 2021–22 hiring boom. Some of it is the rate of capacity unwinding at the larger tech employers through 2024–25. The result is that mid-level salary growth has flattened.

Specialist AI and ML engineering hiring is its own market. AI engineers, ML platform engineers, applied AI engineers, and AI safety engineers are commanding premium salary bands across the Australian market. The shortage is real and the salary inflation against general engineering bands has continued through 2025 and into 2026. This is the band where Australian CIOs are losing the best talent to the US and global remote-first employers.

What the CIO operating implications look like in May 2026:

Graduate programs are worth the investment. The CIOs who have kept or restarted graduate programs through 2024–25 are getting cohorts on board who will deliver into 2027 and 2028. The CIOs who paused graduate programs are now competing in a tighter junior market.

Mid-level hiring is a good moment. If there is a known capacity gap in the engineering organisation, the May–September 2026 window is a sensible time to hire into it. The candidate pool is healthier than it has been and salary expectations are more reasonable.

AI talent strategy needs to be specific. Generic “we hire AI engineers” is not working in 2026. The CIOs who are building AI engineering capability are doing it in one of three patterns — hiring senior AI engineers as the anchor and growing capability around them, partnering with an external AI consultancy to bridge capability while internal hiring catches up, or building AI capability inside specific teams (data engineering, platform engineering) rather than as a separate AI function.

Retention is harder than headline numbers suggest. The voluntary attrition rate at most Australian mid-market IT organisations has come down through 2024 and 2025. That is good news in headline terms. The harder problem is that the regrettable attrition rate — the attrition of the people you most wanted to keep — has not come down as much. Engineers who are quietly being approached by AI-focused employers are leaving for above-market AI salaries. That is the retention problem that matters.

A few practical notes for IT leaders running hiring through the rest of 2026:

Compensation review. The compensation bands set in 2024 are now meaningfully behind market on AI engineering and slightly ahead of market on general engineering. Re-banding is worth doing inside the next two quarters.

Remote work. Australian IT employers have settled into a hybrid pattern at most organisations. The fully-remote employers are still recruiting strongly from interstate. The CIOs running rigid in-office mandates are losing some of their better mid-level engineers to fully-remote alternatives.

Internal mobility. The CIOs who have built clean internal mobility programs are quietly retaining people who would otherwise leave for AI work. Moving an engineer from a back-end role into an applied AI role inside the same company is one of the more effective retention plays of 2026.

For the rest of the year the IT talent market in Australia is likely to stay in roughly this shape. Junior demand high, mid-level softer, AI specialist hot. CIOs planning 2026/27 capacity should run their hiring strategy with that band-by-band picture in mind.