Australia stands on the brink of a multibillion-dollar data center expansion as demand from major technology companies keeps building. Speaking at the AFR Commercial Property Summit on Monday, Aware Super CEO Deanne Stewart said the country could unlock substantial investment if it resolves bottlenecks around grid connections, zoning approvals, construction costs, and suitable sites. Aware Super is one of Australia's largest superannuation funds, and its leadership's engagement with the sector signals growing institutional investor interest in digital infrastructure as an asset class.

According to AirTrunk Operating Pty Ltd, a major Asia-Pacific data center operator with a significant Australian footprint, major US technology companies are already showing heightened interest in building data centers in Australia. The firm said that over the past few months, tech giants including Google, Apple, Meta, Amazon, and Microsoft have shown a significantly greater appetite for investing in the country than anyone originally anticipated.

Despite the challenges facing the sector, Australian executives remain optimistic that the industry will keep growing. "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.

Up to $1 trillion in global data center investment

Digital analysis platform Westpac IQ has estimated that investment in Australia's data centers could surpass $155 billion. According to its report, such investment could deliver a net GDP boost of roughly $75 billion, generate additional economic spillovers, and support as many as 400,000 jobs.

Stewart noted that 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 said 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 translate into concrete investment commitments in the years ahead.

Grid connections and land availability loom large

AI data centers are on track to consume 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 dynamic that could add costs for consumers. AEMO is the body that plans and operates Australia's electricity and gas markets, making its warning a key regulatory signal for the pace of sector growth.

While community opposition in Australia remains relatively low, complaints have surfaced. In New South Wales, activists are lobbying for an urgent freeze on expansion, while in Tasmania a petition with more than 10,000 signatures has forced a parliamentary inquiry into a proposed moratorium.

Tim Robinson, senior director of real estate, APAC, at Equinix, also raised concerns about land shortages and high costs. Equinix operates data centers across the Asia-Pacific region, giving it direct exposure to the siting pressures he described. "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," he said.

Weighing these challenges, 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 proposed project locations are 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 the 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. This demand pattern has driven data center construction booms in other markets such as the United States and Ireland, where electricity constraints have also become a policy issue.

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. Regions with access to renewable energy and available land could also become more attractive to technology companies seeking to establish large-scale facilities.

Still, the speed of investment will ultimately determine whether Australia can expand its infrastructure quickly enough. Delays in securing electricity connections, planning approvals, or suitable sites could stall projects — or push them to other markets. With global technology companies intensifying their AI investment, Australia now competes in an ever-growing global data center market alongside the world's most advanced technology firms.

If policymakers and industry can address infrastructure limitations without imposing excessive pressure on the public and other sectors of the economy over the next decade, the sector could become a key source of investment, jobs, and growth.

Resource crowding, however, remains a significant 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. As a result, standard economic indicators — such as a drop in home approvals and softening house prices — may not influence monetary policy in the way they usually do.