‘From laggard to leader’: Australia’s tech gamble goes up $30b in six months

Businesses have doubled their planned spending on data centres to fuel the AI revolution in just six months, with Australia now only second to the United States as the global destination for the new technology.

Figures compiled by Deloitte Access Economics reveal businesses have either started construction on or begun planning for almost $52 billion worth of data centres. Just six months earlier, they had plans for $23 billion worth of projects.

Businesses are now on track to spend more on data centres than Australians spend on clothes and footwear.

The centres, which are pivotal to the roll-out of artificial intelligence and productivity-enhancing technologies, are being built in every state and territory – but NSW and Victoria remain their prime locations.

The Reserve Bank has noted that the increase in data centres has been one of the country’s more surprising economic developments over the past year, turning around total business investment levels. In recent months, centres worth $5 billion and $3.1 billion have been proposed for suburban Sydney.

Deloitte Access director Sheraan Underwood said such was the increase in planned spending on data centres that only the US was attracting more investment than Australia.

“Business investment has shifted from laggard to leader. Total business investment is expanding at its fastest pace in more than four years, supported by energy infrastructure and digital investment,” she said.

“Data centre development has pushed machinery and equipment spending by IT firms to record
levels. However, developers are increasingly facing constraints – most notably access to reliable
electricity – prompting further investment in generation, storage and network infrastructure.”

Governments and businesses are betting that AI will underpin a revival in Australia’s moribund productivity performance.

Data released by the Bureau of Statistics last week showed that through 2024-25 multifactor productivity across the market sector of the economy fell by 0.5 per cent.

The fall was driven by a 3.1 per cent drop in the mining sector, which, because of the high value of its exports and relatively small workforce, greatly affects the economy-wide measure of productivity. It also fell in the labour-intensive hospitality sector (down by 3.1 per cent), manufacturing (2.9 per cent) and construction (2.8 per cent).

There was an almost 10 per cent lift in productivity across agriculture, a 5.2 per cent increase for arts and recreation, while there was a 4.1 per cent improvement in information technology.

Deloitte noted that while it was yet to be seen whether AI would deliver a “sustained acceleration” in productivity, the increase in data centres would expand the capacity for the economy to grow sustainably.

“Data centres are highly capital-intensive, with relatively modest direct employment during both construction and operation,” it found.

“The broader economic benefits are therefore likely to accrue indirectly and over time, by enabling more data-intensive business models, greater automation and innovation across other industries.”

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