The Hidden $155 Billion Sector Driving Australia’s Growth
Synopsis
Australia's rapidly growing data centre industry is emerging as a major economic growth engine, with investment expected to exceed $155 billion over the next decade. Driven by rising demand for artificial intelligence, cloud computing and digital services, the sector has become one of the country's strongest investment areas. Economists and government officials say data centres are supporting growth despite broader economic challenges. However, concerns remain about their growing energy and water consumption. Experts warn electricity demand could rise sharply in coming years, increasing pressure on power networks and potentially lifting electricity prices.
Data centres are expected to rank amongst Australia's top three growth industries with over $155 billion of investment expected within the next decade.
Data centres are the building or collection of buildings devoted to housing computer and peripheral systems, which include redundant or backup power supplies ( Uninterrupted Power Supply [UPS]) data communications connections (internet connection), environmental controls (air conditioning, fire suppression) configuration that allows interconnectivity between the internet.
The boom in AI has driven hyperscale data centres, which are massive mega-farms run by tech behemoths like Amazon, Microsoft, Google, Meta and Apple. Global data centre investment has made Australia the second most attractive for these developments in the world, after the US, with regulations perceived as controlled/stable, land and resources readily available and proximity to Asia-Pacific markets.
What Data Centres Will Mean For The Australian Economy
The economy has grown 0.3% in the latest quarter but still faces rising unemployment, inflation and conflict over the Middle East. That growth has been attributed by economists to the boom in data centres.
The Climate Council says there are about 160 operational data centres in Australia, mostly in New South Wales and Victoria, with a further 90 planned. Investment in the sector is expected to be over $155 billion by Westpac senior economist Pat Bustamante over the next ten years, equal to about 5.6% of annual GDP.
The Reserve Bank Governor Michele Bullock pointed to data centres recently as an area of strong long-term growth potential. Investment in software, data centres and renewable energy, she said, was likely to stay a bright area of the economy.
Government Sees Major Opportunity
Assistant Industry Minister Andrew Charlton said data centres have the potential to deliver huge economic opportunities, through job creation and investment.
The sector also supports the energy system in Australia, increases demand for engineering, software and cybersecurity services from local firms, attracts high-skilled workers from overseas centres and provides businesses greater access to powerful computing capabilities. The Government also believes that extra value from the digital economy can remain in Australia instead of leaking abroad.
Prime Minister Anthony Albanese said new data centres would be required to use cleaner and cheaper energy while supporting productivity improvements and sustainable long-term growth of the economy.
Worries on Energy Consumption and Power Value
Environmental groups and energy experts alike have noted the rise in electricity and water needs of the sector as larger than expected despite recent economic benefits. To maintain the same level of operation, hyperscale data centres utilise a large amount of energy and need significant quantities of water for cooling.
According to the Australian Energy Market Operator, data centre demand for power is tipped to increase 26% in five years. According to the Clean Energy Finance Corporation, data centres could account for as much as 11% of grid electricity use by 2035, up from about 1% today.
The rise in demand could lead to higher electricity prices in some states, however, unless generation of renewable energy keeps pace with new data centre capacity. This was accompanied by non-binding expectations for companies on the given power, while balancing energy and environmental values with economic growth, the government came up with last year.
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