AI might feel like a software conversation, but increasingly it is also an infrastructure conversation.
Every AI model, cloud platform and digital service ultimately needs somewhere to run. That means data centres and as demand for AI grows, Australia is facing some fairly significant decisions about how much of that infrastructure we want here and what we expect from it.
There is clearly an opportunity.
Data centres can attract investment, support Australia’s digital capability and create demand for local skills, infrastructure and supporting industries. Keeping more computing capability in Australia can also matter when businesses and governments are thinking about resilience, security and where important data and systems are located.
But there is another side to the conversation.
Data centres require substantial electricity, and demand is increasing quickly. AEMO currently forecasts data-centre electricity consumption in the National Electricity Market increasing from about 5 TWh in 2025–26 to 34 TWh by 2035–36.
Then there is water.
Servers generate heat, and cooling large facilities can require significant resources. Infrastructure Australia says the impact can be particularly important at a local level because data-centre water demand tends to be concentrated around urban areas and is expected to grow.
These are no longer side issues. In March 2026, the Australian Government introduced national expectations for data-centre and AI-infrastructure developers covering energy, sustainable water use, Australian jobs and skills, local capability and community benefit.
So perhaps the conversation shouldn’t be reduced to “Should Australia build more data centres?”
The better question is: What kind of data-centre growth makes sense for Australia?
If a major project is being considered, boards and investors need to look beyond the technology itself. Where will the power come from? How will water be managed? Is the location appropriate? What does the surrounding community gain? What infrastructure needs to be built around it? And does the investment strengthen Australian capability over the long term?
Those questions don’t make data centres a bad investment. They make them a serious one.
Australia has an opportunity to participate in the infrastructure behind the AI economy. But the strongest projects will not simply be the ones with the most computing power.
They will be the ones that can show how technology, infrastructure, environment and community can work together.
