Tech billionaire Mike Cannon-Brookes has urged governments to plan for massive job disruption because of rising automation, warning Australia faces a "painful" transition.

The co-founder of software giant Atlassian says there'll be major upheaval in the local workforce.

"I hate being Chicken Little and trying to scare people but it seems to be the only way to get action - there will be massive job disruption," Mr Cannon-Brookes told a Senate inquiry on Tuesday.

While many new jobs will be created by technology, people who lose jobs in other sectors do not face a smooth transition, he said.

Mr Cannon-Brookes says Australia faces the major challenges of upskilling workers, making education a life-long process, ensuring post-disruption employment is created locally and providing support to people who lose their jobs.

"This time we know what's coming. I think we must act and act soon," he said.

"This is not science-fiction."

Mr Cannon-Brookes, who Forbes estimated to have a fortune of $US3.4 billion last week, also had a warning for the retail sector.

"The head-in-the-sand attitude of Australian businesses scares me a lot," he said.

"Amazon is going to tear apart Australian retail as they did in the US."

Mr Cannon-Brookes believes Australia is capable of building a world-class technology industry and skills to manage disruption.

But as it stands, many graduates are being lost to US-based tech giants contributing to a digital skills shortage in Australia.

"Try telling a 21-year-old kid that's going to work for Google or Amazon or Facebook that we have lots of opportunity for them in Sydney or Melbourne - it's hard," he said.

The Senate committee investigating the future of Australian workers is in Melbourne on Tuesday hearing evidence from unions, industry groups and think-tanks.