Australia data centre expansion faces inflation pressure and community opposition

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Australia data centre expansion

Highlights

Australia's data centre capacity could grow from 2.3 gigawatts today to between 23 and 67 gigawatts, with Commonwealth Bank forecasting 9 gigawatts by 2035.
Data centre operators raised at least A$35 billion so far this year—a 46 per cent rise from 2025—amid rising domestic inflation pressures related to skilled labour and construction materials.
Community opposition to power and environmental impacts caused NEXTDC's Melbourne expansion to suffer a one-day 42 per cent share price drop, erasing A$3 billion in market value before recovery.

Capacity growth and cost pressures

As reported by ABC News, Australia currently has about 2.3 gigawatts of power capacity across 79 data centres, according to IBISWorld research cited in the report, while planned projects could lift that to between 23 and 67 gigawatts under Australian Energy Market Operator estimates. Commonwealth Bank research forecasts capacity reaches 9 gigawatts by 2035, indicating the sector remains in an early expansion phase even if not all proposed projects proceed.

Supporters of the buildout argue the sector offers a major economic opening for Australia as construction spending and long-term digital infrastructure investment rise. Belinda Dennett describes the boom as a chance to build on the country's renewable energy advantage, estimating the opportunity at A$4.1 billion a year.

The Reserve Bank of Australia is also weighing the near-term economic effects of the surge in investment. An internal RBA note suggests local data centre operators have raised at least A$35 billion so far this year, up 46 per cent from 2025, and Governor Michele Bullock says imported technology limits some domestic inflation pressure, although demand for construction materials and skilled electricians is still pushing on local costs.

Planning disputes reshape regional outlook

Community resistance is becoming a more material risk for developers as data centres move beyond traditional industrial zones and into areas closer to homes and farmland. Opponents in Australia are raising concerns about noise, light, scale, water and electricity use, echoing campaigns that have already gained traction in the U.S. and Europe.

In Victoria, Planning Minister Sonya Kilkenny did not approve or reject nine fast-tracked data centre projects before the state entered caretaker mode ahead of this month's election, leaving the proposals without a decision. A Labor spokesperson says the government welcomes jobs and investment from the industry but is imposing guardrails, including requirements for new projects to secure their own renewable power and avoid sites near schools.

Project disputes are already affecting corporate valuations and development timelines. Opposition linked to power infrastructure disrupted plans to expand an existing NEXTDC site in Melbourne's inner west, and the conflict triggered a one-day 42 per cent drop in the company's share price, wiping A$3 billion from its market value before the stock later recovered.

We have also looked at Quantum DC opposition in South Australia over its paused Adelaide Hills data centre proposal.

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