HP and Microsoft revealed the trend in a study on Wednesday that also showed most small and medium businesses were eager to adopt AI technology, although just over half had done so.
The news comes after the federal government declared plans to make AI a "national priority" following its productivity roundtable in August, and after OpenAI announced it would establish an office in Australia in 2025.
The research, titled From Hype to Help, surveyed more than 500 business and IT decision-makers working for small to medium businesses in Australia.
It found almost nine in every 10 respondents wanted to use AI to streamline operations (88 per cent), and more than half of small and medium-sized businesses were already using the technology (58 per cent).
Top tasks nominated for AI automation included internal reporting, dealing with repetitive tasks, engaging with customers, and assisting with the hiring of staff.
But the report also found more than one third of businesses were using free versions of generative AI tools such as Open AI's ChatGPT (36 per cent), Microsoft's Copilot (32 per cent) and Google's Gemini (35 per cent) despite the potential risk to their business.
Of the respondents using free AI tools in business, 81 per cent said they were doing so for tasks involving confidential information, even though it could be used to train the AI software involved.
The risks of exposing company data using public tools were vast, HP Australia and New Zealand managing director Brad Pulford said, and could lead to social engineering and malware risks for the companies involved.
"There may be some short-term gains in terms of cost up-front but there could be very severe consequences if not managed correctly longer term," he told AAP.
"It's immensely concerning when you think about some of that exposure."
More than one in 10 respondents said their businesses lacked the budget to invest in AI tools (15 per cent), but skills were named as a bigger hurdle to its adoption (53 per cent).
The study showed small and medium-sized businesses did not lack the eagerness to use AI technology to improve their operations, Mr Pulford said, but that many were not sure how best to deploy it.
"AI has come to use like drinking from a fire hose: it's come pretty quickly into this space," he said.
"There is an underlying need for enablement and training and empowerment."
Federal Treasurer Jim Chalmers in August announced Australia would pursue AI adoption as a national priority, and would perform a legal analysis to develop local AI regulations.
