Can employers tell if a cover letter is AI generated?

Often, yes. Not because they run it through a detector, but because they have read thousands of cover letters and the AI ones have a texture they come to recognise. In United States surveys, about one in three recruiters say they can spot an AI written resume in under twenty seconds, and 49% of hiring managers say they automatically dismiss an application they read that way.

There is no reliable software for this, and anyone selling you detection is selling you a coin toss. What there is instead is a person who has seen the pattern too many times.

What actually gives it away

Almost none of it is vocabulary. It is structure and stance.

It could be about anyone. The letter describes a competent professional who is excited about an opportunity, and nothing in it could only be true of you.
It restates the job ad back. Three requirements listed, three sentences confirming you meet them, in the same order the ad used.
Adjectives where evidence should be. Passionate, results driven, proven track record. A recruiter reads those as the place where a specific fact was supposed to go.
Nothing is at stake. Real letters have a reason for existing: you want this particular job for a particular reason, and you say what it is.
Uniform rhythm. Every sentence the same length, every paragraph three sentences, no fragments, no asides. People do not write like that.

Why it matters more than it used to

Roughly two thirds of job seekers now use AI somewhere in their applications, on United States figures (65-70%). When most of a pile reads the same way, sounding like the pile is no longer neutral. It is the thing that makes you skippable, and it is why the letters that read as written by a person stand out by doing nothing clever at all.

What to do instead

The fix is not to write worse on purpose or to avoid tools. It is to make the letter contain things only you could have written.

Name the thing you did. Not "improved reporting efficiency" but "took the morning close from ninety minutes to twenty".
Say why this employer. One true sentence about them beats a paragraph about you.
Keep your own sentence rhythm. If you would not say it out loud to a colleague, take it out.
Let it be shorter than you think. Three tight paragraphs that say something specific will beat a full page that says nothing.

If you use a tool, the test is simple: does the output contain a fact it could only have got from you? If it does not, it is going to read like everyone else's.

A note on the Australian market

The figures above come from United States research, because that is where this has been measured. The behaviour travels, but the market does not: Australia is small enough that a recruiter in your industry may well see your name more than once, which raises the cost of sending something generic rather than lowering it. See also the Australian resume format, which differs from the American one in ways that matter.