Artists welcome Labor's decision to rule out copyright law changes that would have allowed tech giants to mine creative works to train artificial intelligence.
The exemption, which was floated by the Productivity Commission in August, would have made it legal for AI companies to scrape content without paying the creator.
Attorney-General Michelle Rowland sunk the proposition on Monday in a moved hailed by artists, authors and media companies as a win that protects against theft of creative work.
"Australian creatives are not only world class, but also the lifeblood of Australian culture, and we must ensure that the right legal protections are in place," Ms Rowland said in question time.
"The decision backs in the value of our music, screen productions, journalism, books and scripts, and of Australian culture at large," Media Entertainment and Arts Alliance chief executive Erin Madeley said in a statement.
Holly Rankin, who performs under the stage name Jack River, called it an "important decision" but said there was more work to be done on protecting creatives from AI.
"What comes next? I believe creators and creatives and Australians should decide where and how their work is used and what they get paid for it," she told reporters in Canberra.
The exemption had been called for by parts of the tech sector, with the commission's interim report estimating AI could deliver a $116 billion boost to the economy over a decade.
However, Liberal senator Sarah Henderson said it was concerning that commissioners had not conducted any economic modelling specifically on data scraping during a recent public hearing on AI and the creative landscape.
The senator said she was pleased to see common sense prevail.
"Frankly, there was absolutely no basis for any change in the law which would allow work to be effectively stolen by big tech companies," Senator Henderson told Sky News.
Atlassian co-founder and Tech Council of Australia chair Scott Farquhar previously backed the commission's proposal and urgently called for reforms allowing AI companies to freely mine data.
"Fixing this one thing could unlock billions of dollars of foreign investment into Australia," he said in a National Press Club address in July.
The Tech Council did not comment directly on the attorney-general's move, but said in a statement it looks forward to working with her department's reference group "to "help develop a framework which we hope will deliver certainty for AI training as well as for artists and creators".
Digital industry group DIGI said it recognised the importance of supporting creatives but text and data mining exceptions have been introduced internationally, including in Japan.
"Governments around the world are exploring how to harness the benefits of responsible AI development and provide appropriate protections to rights holders," the group's managing director Sunita Bose said.
APRA AMCOS chief executive Dean Ormston said the organisation, which represents more than 128,000 songwriters, composers and music publishers across Australasia, was ready to work constructively with tech companies to develop a licensing agreement.
"Tech platforms are shopping for jurisdictions that will water down copyright legislation so that they can find ways to avoid paying creators while profiting from their cultural IP," Mr Ormston said.
"It's time for tech companies to stop delaying and start licensing discussions covering both the input and output of creative materials in AI platforms."
