Australia needs more data centres. So why is the world becoming nervous?

Data centres were once largely invisible pieces of industrial infrastructure.

They sat behind banking systems, government databases, online shopping, streaming services and business software. Most people used them every day without giving them much thought.

Artificial intelligence has changed that.

The extraordinary computing power required to train and operate AI systems is producing a new generation of enormous data centres. These facilities require substantial amounts of electricity, industrial land, transmission infrastructure and, in some cases, water for cooling.

Governments want the investment and technological capability they bring. Businesses want the computing capacity. Unions want Australian workers to share in the construction and employment opportunities.

Communities, however, are beginning to ask what these facilities will cost them.

That tension has now become an international political issue.

New York presses pause

New York has imposed a one-year moratorium on state approvals for new data centres consuming at least 50 megawatts of electricity.

It is not a permanent prohibition on data centres. It is a pause covering very large projects while the state develops standards addressing energy use, water consumption, land use, noise and the effects on surrounding communities.

The decision makes New York the first American state to impose a statewide moratorium of this kind.

The controversy illustrates how quickly attitudes have changed.

Not long ago, attracting a major technology company and its associated infrastructure would have been presented almost entirely as an economic success. Today, governments are being asked whether the investment will increase household electricity prices, consume scarce water or require taxpayers to fund new transmission infrastructure.

Supporters of the industry warn that New York may simply send investment elsewhere. Data centres can be constructed in other American states or other countries, particularly where governments can guarantee land, energy and timely approvals.

The economic opportunity is mobile. The infrastructure burden remains local.

Australia wants the investment — with conditions

Australia faces the same fundamental choice, although the Albanese government is not proposing a New York-style moratorium.

The federal government has instead outlined national expectations for data centres and AI infrastructure. Large operators would be expected to underwrite new renewable generation, pay their share of grid connection and expansion costs, minimise water consumption and prevent those costs from being transferred to households and existing businesses.

The government will seek agreement from the states and territories because planning, electricity infrastructure and water management cross several levels of government.

The political objective is understandable.

Australia wants to become a significant location for AI and digital infrastructure, but the government does not want households to discover that they are subsidising the electricity system required to operate it.

The principle is straightforward: a data centre should not be permitted to consume the output of a substantial power station while leaving ordinary electricity customers to finance the additional generation and transmission capacity.

Applying that principle will be more complicated.

Why unions want a place at the table

Unions also want a say in how the industry develops.

The construction of data centres requires electricians, engineers, technicians and other skilled workers. Electrical unions are seeking apprenticeship requirements and stronger workforce commitments as part of the approval process.

Other unions are more broadly concerned about the effect of artificial intelligence on employment, workplace surveillance and automated decision-making.

For them, data centre policy is not merely a construction issue. These buildings contain the computing infrastructure that may transform occupations across the economy.

Business, however, is wary of allowing every social and industrial concern surrounding AI to become another condition attached to building the infrastructure.

There is a legitimate difference between ensuring that projects employ and train Australians and turning data centre approvals into prolonged negotiations involving unrelated workplace demands.

Australia needs appropriate safeguards. It also needs an approval system that can reach decisions.

What is there to fear?

The concerns surrounding data centres are not imaginary.

The first is electricity.

Global electricity demand from data centres rose by 17 per cent during 2025, with demand from AI-focused facilities increasing even faster, according to the International Energy Agency.

A major data centre can consume as much electricity as a substantial industrial operation. When several are concentrated in one area, they can place considerable pressure on generation and transmission networks.

Australian modelling has suggested that, without sufficient new renewable generation and storage, data centre expansion could contribute to materially higher wholesale electricity prices in New South Wales and Victoria.

The second concern is water.

Some centres use water-intensive cooling systems. Industry estimates indicate that Australian data centre water demand could more than triple over five years. Sydney’s data centre sector has been projected to consume approximately 1.9 per cent of the city’s water supply by 2030, although forecasts remain sensitive to the cooling technology used.

There can also be local effects.

Large centres may operate continuously, using cooling equipment, backup generators and substantial electricity infrastructure. Residents may object to noise, industrial development, transmission lines or the construction of a major facility near residential property.

These are reasonable planning considerations.

They do not establish that data centres are inherently dangerous. They establish that their size and location matter.

What does Australia gain?

The benefits are substantial.

Data centres support almost every part of the contemporary economy. Banking, telecommunications, health records, government services, logistics, online retail and cloud-based business systems all depend upon them.

Australian data storage can also strengthen national resilience and reduce dependence on overseas infrastructure.

The AI economy will require far more computing capacity. Countries able to provide reliable electricity, secure land, skilled workers and predictable regulation are likely to attract a greater share of the associated investment.

Data centres also create construction activity, demand for renewable generation and long-term technical employment.

They may not employ as many people after completion as a traditional factory of similar physical size. Their wider economic importance, however, lies in the businesses, research and services that the computing capacity makes possible.

A country without adequate data infrastructure will not escape the AI transformation. It will merely become dependent on infrastructure built somewhere else.

Business wants certainty

Technology and infrastructure investors can operate within demanding rules, provided those rules are understandable and consistently applied.

What business finds difficult is uncertainty.

A developer may be required to secure land, negotiate electricity supply, arrange transmission access, assess water availability and satisfy local, state and federal authorities before construction begins.

If governments continually change the requirements, projects will move to jurisdictions offering greater certainty.

Australia therefore needs firm standards rather than political improvisation.

Operators should pay for the power and infrastructure they require. Water use should be disclosed. Projects should meet environmental and planning standards. Communities should be consulted where there is a material local impact.

Once those requirements have been met, however, governments should permit viable projects to proceed.

Regulation should establish the conditions for investment rather than become a mechanism for preventing it.

The Times View

Australia cannot realistically decide that it does not want data centres.

They are now part of the essential infrastructure of banking, government, communications, commerce and artificial intelligence.

The legitimate question is not whether Australia should build them. It is whether they can be constructed without transferring their electricity, water and infrastructure costs to the wider community.

New York has chosen to pause major projects while it searches for an answer. Australia is attempting to establish national rules while continuing to invite investment.

The Australian approach is preferable, provided the standards are clear and approvals remain practical.

Data centres should pay their own way, contribute to new energy supply and respect the communities in which they operate. Governments, unions and interest groups must also recognise that endless conditions carry a cost.

The greater danger may not be that Australia builds too many data centres.

It may be that uncertainty and over-regulation cause the infrastructure of the next economy to be built somewhere else.