Draft AI laws would bar new suburban data centres, AFR reports

Draft AI laws being prepared by the Albanese government would stop new data centres being built in suburban Australia, the Australian Financial Review reported on 29 October. Business parks in inner Sydney and Melbourne would be the first places the rule is tested, and public consultation is due by the end of 2026.

Projects at gigawatt scale would be directed to regional locations. CDC plans a 1.4 GW campus at Wagga Wagga, while AirTrunk has proposed a 550 MW campus on the old Hydro Aluminium smelter site near Kurri Kurri. Zerra DC's Western Downs Digital Park near Dalby is a further example, with Anthropic having signed a lease that is pending FIRB.

Several Melbourne proposals sit in the area the rule would affect. NextDC applied in February for stages 6 and 7 of its M3 site and expects the Victorian government to decide after the state election on 28 November. Assessments are also under way for GreenSquareDC's Spotswood campus and a second Centuria building at Clayton. All sit in the inner west, where community opposition has already held up power upgrades at the existing M3 facility.

The location rule is part of the same draft package as proposed energy rules. Capital Brief reported that developers were caught off guard by those rules, which might extend a renewables mandate further than expected. Existing facilities, and projects that believed they would be grandfathered, could face obligations worth billions. Chris Bowen has raised power cuts as a possible penalty for centres that do not comply.

For two years operators have argued that power, water and planning are the real constraints. The draft ban is the first public statement from the government that suburban sites themselves are the problem. Inner-city business parks in Sydney and Melbourne are where transmission disputes have already occurred, and regional sites avoid those streets but still need grid supply.