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Treasurer Daniel Mookhey announced on Monday morning the state government would be partnering with the ACCC to “deploy world-leading AI technology”.

Mr Mookhey said the ACCC would use the controversial technology to detect and “flush out cartel behaviour” in the Labor government’s procurement.

“Each year the NSW government spends $42bn buying goods and services,” he said.

“We want to make sure that taxpayers are getting full value for their money by ensuring that government procurement isn’t an opportunity for criminal cartel behaviour.

“We want to be able to reward law-abiding businesses by punishing those businesses that choose to break the law.”

Under the deal, the NSW government will hand over “vast troves of procurement data to the ACCC”, Mr Mookhey said.

He said the partnership came as a result of his federal counterpart Jim Chalmers’ national economic roundtable earlier this year.

A similar partnership between the ACCC and the South Australian government was struck earlier this year.

On Monday, ACCC chair Gina Cass-Gottlieb confirmed there had also been discussions with the Commonwealth government.

She said AI would give the watchdog much better tools to proactively spot areas of procurement that could be the target of bid rigging.

Artificial intelligence would be used to help spot “patterns” and detect bid rigging in the tender process before being handed to an investigator for potential prosecution.

“The agency has been working on algorithms in a combination of our expertise software techniques for some time in order to pick up what these patterns are,” Ms Cass-Gottlieb said.

“But, we’ve been waiting to get access to these data troves, which will allow us to apply them and then to build that expected expertise and that recognition.”

Finance Minister Courtney Houssos said the partnership did not necessarily mean that procurement was already being rorted.

“There is a global study from the OECD that has shown a significant reduction in procurement costs as a result of these (programs),” she said.

“This will improve the integrity of our procurement system and allow local, fantastic businesses better access to the $42bn that the NSW government spends each year”.

State and federal governments are increasingly turning to AI amid crises in productivity.

The NSW government recently established the first Office for AI, with AI also being rolled out in public school classrooms from term 4.

NSW Opposition Leader Mark Speakman previously pledged to establish a minster for AI if the Coalition was elected at the next state election.