The AI build-out: A faster economic payoff than LNG
Front-loaded $175bn data centre pipeline could trigger a further $50bn in renewable energy investment
Australia's data centre and renewable energy investment surge continues to gather momentum, generating significant spillovers to related industries, including construction, professional services, wholesale trade, logistics and manufacturing. Industries that we expect to benefit most from this investment are already showing signs of a turnaround in employment, wages and profitability.
When we first looked at Australia's data-centre investment pipeline, we estimated it was worth at least $155 billion over the coming decade. Since then, industry announcements and approvals have seen a further acceleration. Most recently, Nvidia-backed developments and large-scale commitments such as Firmus' planned 2GW rollout have reinforced the view that growth is occurring slightly faster than previously expected. Furthermore, industry estimates of development costs have continued to rise. As a result, we now estimate that the data-centre investment pipeline is closer to $175bn, and importantly, that the majority of this spending (around $110bn) is likely to occur over the next three years, to end 2029.
In addition, it has also become increasingly clear that data-centre operators will need to bring their own energy supply and contribute to related network infrastructure to avoid shifting costs onto existing electricity consumers. Our estimates suggest that associated energy and network investment could add a further $20-50bn, depending on location and network requirements. This represents a significant ‘second wave’ of investment, with a large and stable source of demand providing the confidence needed to accelerate renewable energy projects across Australia.
There are clear parallels with the LNG investment boom of the 2010s (see Box: LNG vs Data centre investment below). Both booms are of a similar magnitude at around $230bn (including broader renewable energy investment), feature substantial foreign investment and rely heavily on imported equipment. LNG projects likely exhibited slightly higher import leakage, reflecting the large share of imported LNG trains, compressors, turbines and prefabricated modules that were manufactured overseas and installed locally.
By comparison, while data centres depend heavily on imported servers, GPUs and networking equipment, a significant share of total project expenditure flows into domestic construction, engineering, electricity infrastructure and professional services. So while the equipment component of a data centre is highly import-intensive (100% in some cases), overall project import penetration is materially lower once domestic construction and infrastructure are included.
Our input-output modelling suggests that, once spending enters Australia, both LNG and data-centre investment generate broadly similar amounts of domestic value added and employment impacts. Local economic impacts are likely to be around half of total investment.
Data centres also have broader industry linkages, with benefits flowing through construction, electricity infrastructure, professional services and technology-related sectors, while LNG benefits were more heavily concentrated around resource extraction and export supply chains (see charts below).
There are other important differences. Data-centre projects typically become operational within around three years, compared with around eight years for LNG developments (including export terminals). This means the economic benefits are likely to be considerably more front-loaded.
LNG ultimately generated an export dividend, increasing export volumes and national income. Data centres generate compute capacity. Their long-run economic value will depend on the extent to which Australia can translate that compute capacity into AI adoption, productivity growth and, potentially, exports of digital and computing services.
Box: LNG vs Data centre investment
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LNG investment boom (2010 - 2018)
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Data centre investment boom (2025-30)
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Import intensity
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Highly import-intensive (60-75%), with entire structures, including floating LNG facilities, imported and installed in Australia.
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Highly import-intensive (50-60%), with most servers, chips and cooling equipment imported, although there is also a significant domestic construction and infrastructure component.
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Ownership
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Foreign capital and large mining conglomerates.
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A mix of Australian data-centre developers and operators, with underlying demand driven by hyperscalers.
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Resource demands
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Heavy demand for Australian natural resources and associated infrastructure, including ports, rail and roads.
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Heavy demand for electricity, transmission infrastructure, water and digital connectivity.
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Project timeframe
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Typically around 8 years to become operational.
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Typically around 3 years to become operational.
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Secondary investment effects
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Limited follow-on infrastructure requirements once projects were approved.
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Triggering a second wave of investment in generation, storage and transmission infrastructure that could add a further $25-50bn.
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Benefits during construction phase
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Benefits accrued over a longer construction period.
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Benefits are more front-loaded, arriving sooner through construction and energy investment.
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Employment intensity
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High demand for labour during construction, but relatively few workers required once production begins.
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Significant construction activity, but minimal ongoing staffing requirements once operational.
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Benefits during production phase
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Export dividend through LNG exports, with benefits concentrated in the resource sector.
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Productivity dividend through compute capacity and AI adoption, with gains spread across a broad range of industries.
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Export potential
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Exported LNG.
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Potential to export compute services and reduce reliance on imported compute capacity.
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