Published on the 04/02/2026 | Written by Heather Wright

Planning framework, resources, and those economic benefit claims…

New South Wales has launched Australia’s first parliamentary inquiry into data centres, amid concerns the state government – and others – have been ‘suckered in by a slick get rich quick scheme’.

The Public Accountability and Works Committee opened the inquiry last week, marking the formal start of a review into the scale and trajectory of data centre development in the state including planning policy, infrastructure and resource requirements, the ‘opportunity cost’ of allocating land to data centres and economic outcomes.

“If the inquiry is going to be useful it needs to do more than catalogue concerns, pairing issues  with practical, implementable solutions.”

NSW, which is already home to around 90 data centres and offers fast-tracked planning pathway via the Investment Delivery Authority, approved or received ‘state significant development’ applications for 22 more data centres last year.

AI has driven further demand for data centres, with $26 billion of data centre investment forecast in Australia by 2030.

While the NSW state government has been a strong supporter of the data centre sector inquiry committee chair and Greens MP Abigail Boyd says the inquiry is essential to ensuring NSW does not repeat mistakes seen overseas.

“Every jurisdiction facing runaway data centre growth has learned the same lesson the hard way: When governments allow development to race ahead without an integrated strategy, the public ends up paying the price.”

She notes that data centres have become big business – with big energy and water demands, and says they have driven up power prices, stalled housing development and ‘destroyed communities through noise and heat effects’ in overseas jurisdictions.

The NSW Liberals, meanwhile, caution against framing the sector as a threat. They argue the inquiry must emphasise ‘the extraordinary economic and social opportunity presented by AI’ and the critical role data centres play underpinning AI, cloud computing, health systems, cybersecurity, financial services and government systems. If NSW fails to invest, global capital will bypass the state, they argue.

Wide-ranging scope

One driver behind the inquiry’s launch is the steep trajectory of resource consumption. The Greens, who initiated the inquiry, claim NSW grid power demand is expected to rise 28 percent over the next 10 years, driven by data centre power requirements, with data centres expected to consume around 11 percent of NSW electricity supply by 2030. Water use is also a growing concern: Data centre currently consume under one percent of Sydney’s water supply, but estimates suggest this will explode to 25 percent by 2035, equating to around 250 megalitres a day.

But the inquiry’s remit goes far beyond water and power to consider impacts on surrounding communities, including noise, air quality and heat, traffic and construction impacts and land use conflicts, whether data centre resource demands are impinging on development of new housing supply, and whether planning frameworks ‘appropriately’ balance data centres against competing social, environmental and economic needs.

It will also be looking at the planning framework which has enabled NSW’s data centre boon, including classification of data centres as state significant development (SSD) and the use of power-consumption thresholds as a trigger for SSD assessment, and the role of fast track and facilitation mechanisms, including the Investment Delivery Authority and other whole-of-government coordination processes. Data centres in NSW are commonly assessed as SSDs, with that assessment tied largely to electricity demand.

Also under the microscope will be the economic and distributional outcomes of the data centre developments – including employment, investment and local economic activity benefits.

As previously noted by iStart, hyperscalers are wont to release large economic impact models touting multi-billion dollar economic benefits of their proposed build, along with job and training claims. Those figures, which often strain credulity, are rarely validated after the fact.

Says Boyd: “Data centres suit the needs of governments perfectly – a supposed solution to economic preoccupations around productivity and growth, and a big new development to cut a ribbon on. I think we need to seriously interrogate those assumptions and decide for ourselves whether the environmental and climate implications are costs the public are willing to bar.”

Data centre operators are clearly hearing the concerns. In November, a peak body for data centre operators, Data Centres Australia, launched to ‘secure Australian national benefit in the global race for AI infrastructure’. It’s remit? To work with government and stakeholders to address key ‘challenges’ in areas such as planning and development, energy, water and workforce.

Industry have acknowledged the inquiry with some positioning it as an opportunity to ‘lift the quality of the debate’. Andrew Sjoquist, founder and CEO of ASE Tech Group which includes WinDC, says if the inquiry is going to be useful it needs to do more than catalogue concerns, pairing every issue with practical, implementable solutions.

“That starts with clarity on metrics,” Sjoquist says on LinkedIn. “We need agreed measures of what ‘good’ looks like across economic impact, social licence, environmental outcomes and system resilience. Generalised statements help no one. Clear benchmarks do – especially if they can guide investors, planners and communities alike.”

The inquiry’s value, he says lies in whether it can move the conversation from whether data centres should exist, to how they can be designed, located and operated to maximise net benefit.

Beyond NSW

While NSW may be the first Australian jurisdiction to establish a dedicated inquiry into data centres, the pressures it is addressing are far from localised. Other Australian states are experiencing similar growth, driven by hyperscalers and enterprise demand.

New Zealand too, is seeing significant data centre development, particularly in Auckland. Although New Zealand’s regulatory responses differ, concerns around energy demand, grid readiness and environmental impacts mirror those under examination in NSW.

Submissions to the inquiry close in late March with a final report due at the end of September.