Australia could be on the verge of a multibillion-dollar data center expansion as demand from major technology companies continues to grow. Speaking at the AFR Commercial Property Summit on Monday, Aware Super CEO Deanne Stewart said the country could unlock significant investment if it can address bottlenecks around grid connections, zoning approvals, construction costs and suitable sites.
So far, according to AirTrunk Operating Pty Ltd, big US tech companies are already showing more interest in building data centers in Australia.
The firm contended that in the last few months, tech giants like Google, Apple, Meta, Amazon, and Microsoft have had a significantly greater appetite for investment in the country than anyone originally anticipated.
Besides the challenges facing the sector, Australian executives are optimistic that the industry will continue to grow. “Australia has many advantages.
We have significant advantages in Australia in terms of land, renewables, and security, and while power and grid connections are constraints on growth, they’re not putting people off.
What is important is consistency, consistency, and consistency in terms of government policy and taking the historic view,” Stewart contended.
Stewart says global data center companies could see up to $1 trillion in investments
Digital analysis platform Westpac IQ had earlier estimated that investment in Australia’s data centers could easily surpass $155 billion.
Such an investment could deliver a net GDP boost of roughly $75 billion, create additional economic spillovers, and support as many as 400,000 jobs, according to its report.
According to Stewart, current capital allocations to data center companies total US$750 billion worldwide, with higher estimates projecting next year’s total to exceed US$1 trillion.
She noted that the growing flow of global capital could present a major opportunity for Australia. “It’s certainly impacting markets all around, with a return of more than 20 percent per annum.
For Australia, that’s a great opportunity to do something significant with the investment coming here,” she said. Similarly, Sabooh Whitelaw, associate vice president for energy and utilities, noted that growing US demand could lead to concrete investment commitments in the years ahead.
Data center developers will need to consider grid connections and land availability
However, AI data centers are on track to devour 13% of Australia’s total power by 2035-36, up from 3% today. The Australian Energy Market Operator has warned that data centers will need power faster than the country can build new energy grids, a situation that could add costs for consumers.
Though community opposition in Australia remains relatively low, there have been a few complaints. In New South Wales, activists are lobbying for an urgent freeze on expansion, while in Tasmania, a petition with over 10,000 signatures has successfully forced a parliamentary inquiry into a proposed moratorium.
Tim Robinson, senior director, real estate, APAC, Equinix, also raised concerns about land shortages and high costs. He stated, “The cost of land is now a huge consideration for us, and we’ll see centers gravitate outwards over time, away from the city fringe.”
Taking these challenges into consideration, CommBank View: Economics & Markets Economist Lucinda Jerogin previously asserted that the availability of power, water, grid connections, and suitable sites will be crucial in deciding which projects proceed and where new data center clusters develop.
Like Robinson, she argued that the location of proposed projects is also broadening beyond New South Wales and Victoria. “We’re starting to see more projects proposed, as you say, in the Northern Territory, and in places like South Australia, where some of those electricity and grid constraints are less severe,” she said.
AI demand could reshape Australia’s data center landscape
The rapid development of artificial intelligence is emerging as one of the biggest drivers of data center demand. AI models require significantly more computing power than many traditional digital services, increasing the need for large facilities equipped with high-performance chips, advanced cooling systems, and reliable electricity supplies.
For Australia, the expected expansion could create opportunities beyond the data center industry itself. Developers, construction companies, engineering firms, energy providers, telecommunications companies, and property owners could all benefit from increased investment.
Areas with access to renewable energy and available land could also become more attractive to technology companies looking to establish large-scale facilities.
But the speed of investment will ultimately determine whether Australia can expand its infrastructure quickly enough. Delays in obtaining electricity connections, planning approvals, or suitable sites will delay projects or even push them to other markets.
With global technology companies intensifying their investment in AI, Australia is now in an ever-growing global data center market that is becoming increasingly competitive with the world’s most advanced technology companies.
If policymakers and industry can address infrastructure limitations without imposing excessive pressure on the public and other sectors of the economy over the next ten years, the sector can become a key source of investment, jobs, and growth.
Nonetheless, resource crowding is also a major concern. James McIntyre, an Australian economist with Bloomberg Economics, issued a research note warning that data center developments will worsen supply constraints by diverting critical trades and construction capacity away from housing and renewable energy infrastructure.
Likewise, Ivan Colhoun, chief economist at CreditorWatch Pty Ltd., cautioned that the data center surge will inflate material prices, labor demand, and wages.
This could mean that standard economic indicators, such as a drop in home approvals and softening house prices, won’t influence monetary policy as they usually do.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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