Federal government sets national AI data centre expectations as industry flags concerns

Operators must fulfil ‘social license’, but industry players raise questions around cost, competition and uneven treatment.

As the number of data centres is expected to boom in coming years, the federal government has released a set of ‘expectations’ to guide development in Australia.

The government expects operators to prioritise national interest, invest in skills and jobs and support research, innovation and local capability.

However, local operators may face grater pressure competing with global providers that benefit from scale and established supply chains.

Data centre capacity is expected to double from 1,350 MW in 2024 to 3,100 MW by 2030, with additional investment forecast to reach AUD$26 billion, according to a Mandala report.

“The focus on local AI infrastructure raises some concern around cost competitiveness with global providers, particularly during the current market volatility,” Clint Thomson, director, TechConnect said.

The expectations call for compute access for local AI start-ups and research, but these price-sensitive groups may turn to cheaper offshore options, undermining the goal of building local capability.

“It may only be the hyperscaler clouds that can really provide economic options,” he said.

At the same time, ongoing shortages in memory and storage — or RAMageddon — are also driving up costs, potentially slowing data centres development and adding pressure on local operators.

Supply chains for AI chips and memory are already under pressure, with ongoing conflict in the Middle East further impacting decision making, said Thomson.

Uneven playing field for smaller operators

The expectations apply to hyperscalers, large-scale AI compute centres and co‑location sites, and sit alongside existing data, cyber, national security, privacy and waste management requirements. They do not apply to small-scale edge or on-site data centres.

Data Centres Australia, which represents the local industry, welcomed the guidelines, but raised questions about how new proposals will be assessed, given the lack of formal frameworks.

It also called for clarity on how the data protection expectation aligns with existing critical infrastructure requirements under the SOCI Act.

The expectations include support for the local energy transition, with operators expected to underwrite new renewable power supply, fund new grid connectivity and use water sustainably.

Data Centres Australia criticised the decision to exclude on-premises data centres. It said smaller services account for approximately 80 percent of local compute capacity, while being up to 67 percent less energy efficient than purpose-built facilities.

Belinda Dennett, CEO, Data Centres Australia said, “We support measures that hold all operators to this standard, but believe that excluding on-premises data centres is a significant omission that undermines the intent of these expectations.”

No guidance on location of data centres

The government sid operators must meet these expectations to fulfil their social licence to operate. However, it has not outlined any location requirements for data centres.

Location and system design are critical, according to Andrew Sjoquist, founder and CEO of WinDC, which specialises in data centres located at wind and solar farms that harness unused renewable energy.

Sjoquist argues that infrastructure should be located where energy already exists, rather than adding more pressure into metro grids.

“Not all compute needs to be in the city, and that’s where the national opportunity sits,” he ended.