Australia urged to host more regional AI data centres

Data Centres Australia has published research arguing that Australia should host more regional AI data centre capacity, saying the shift could cut global emissions from AI.

The study, prepared by Mandala Partners for the industry body, argues that Australia could export clean energy indirectly through AI computing rather than physical electricity transmission. Data processed in Australian facilities running on lower-emission power, it says, would displace activity that might otherwise be handled in countries with more carbon-intensive grids, including Indonesia.

Under the modelling, a 1.9GW AI infrastructure export opportunity hosted in Australia would produce an estimated 3.2 million tonnes of CO2. The same capacity hosted in Indonesia would produce 11.9 million tonnes, according to the analysis.

Mandala also found Australia to be the best-positioned market in the Asia-Pacific region to deliver lower-emissions AI compute by 2030. Projected emissions from Australian AI compute would be less than half those of the nearest competitor and nearly four times lower than the highest-emitting market in the region, the report says.

Economic case

Beyond the emissions argument, the report sets out a broader economic case for expanding data centre investment. It estimates that capturing more of the regional AI export market could add up to AUD $4.1 billion in annual economic activity, support as many as 17,120 additional jobs, and bring up to AUD $52 billion in new investment.

The analysis presents that opportunity as an extension of the domestic growth already expected in the sector. On its current path, Australia's data centre industry is projected to generate AUD $5.6 billion in annual economic activity and support 23,040 ongoing operational jobs by 2030.

Meeting domestic demand by that point would also drive construction activity worth a further AUD $19.8 billion and support another 18,930 jobs during the build phase. The gains would be spread across manufacturers, trades, ICT security specialists, and software engineers.

Tom McMahon, Partner at Mandala Partners, said the report viewed AI computing as a practical route for Australia to monetise its renewable energy resources.

"We know Australia is capable of producing abundant clean energy, but the challenge is how to export that energy to the world. Exporting clean energy via compute takes advantage of existing subsea cables that are responsible for carrying data and internet traffic in and out of Australia," McMahon said.

He said the regional build-out of AI infrastructure was already under way and that policy settings would shape where investment landed.

"The high global demand for AI-enabled advances means many data centres will be built in the Asia-Pacific region. What our report finds is if Australia moves decisively to get its policy settings right, we can capture a large section of that opportunity. This won't just mean billions of dollars of investment and thousands of additional highly paid jobs. It will also mean millions of tonnes of carbon emissions are avoided and ensure Australia has a seat at the table when it comes to global AI policy development," McMahon said.

Policy and control

The report also links physical hosting of AI infrastructure to strategic influence. If Australia hosts a significant share of regional AI compute, it argues, the country could gain greater influence over standards and governance in the sector.

It also argues that locating hardware domestically would place that infrastructure under Australian legal jurisdiction, strengthening the country's authority over data residency, access, and security under existing rules, including the Security of Critical Infrastructure Act.

The research points to Australia's renewable energy base as a key attraction for data centre investors. It also notes an expected tightening of energy policy, describing a shift from a voluntary approach, under which data centres offset 70% of their energy use with renewables, to a mandated 100% requirement.

Belinda Dennett, Chief Executive Officer of Data Centres Australia, said the findings placed digital infrastructure alongside energy policy and industrial strategy.

"Investing in new digital infrastructure gives Australia the opportunity to lead in the most profound technological shift we have ever seen and boost our role as a global clean energy powerhouse," Dennett said.

"By creating the right policy environment, we can capture more of the AI value chain locally, support thousands of high-skilled jobs, and play a pivotal role in the clean energy transition.

"The economic growth opportunities are exciting, but this is about more than that. It's also about securing our sovereign capability and strengthening our influence over the global standards that will govern AI for decades to come."

The Clean Energy Council also backed the argument that data centre demand could support more renewable generation.

"Data centres have the potential to unlock significant new clean energy generation to power the Australian economy. When data centres help bring in renewable energy projects, they can both boost Australia's energy supply and create new, untapped markets for Australian compute. If we get the rollout right, we can use Australian-made power to back a thriving industry that delivers long-term benefits to our economy and our climate," said Jackie Trad, Chief Executive Officer of the Clean Energy Council.