Calls for Pause on New Datacentre Approvals Amid Land Use Concerns
Transport for NSW and the Reserve Bank have issued warnings that the rapid expansion of datacentres in Australia could consume scarce land needed by logistics firms and housing developments. This competition for land may drive up prices and contribute to economic overheating, prompting calls for a national moratorium on new datacentre projects until stronger protections are implemented.
The swift growth of datacentres has raised alarms within the transport and logistics sectors. Transport for NSW informed the state parliament inquiry on datacentres that significant pressure already exists on the availability of industrial land and infrastructure.
In a submission, the transport agency emphasized that freight and logistics companies rely heavily on industrial land located near markets and transport hubs.
“The shortage of land is causing major freight and logistics operators to leave. They are relocating their main centres to Brisbane or Melbourne where suitable land is available and less expensive,”
Transport for NSW noted that although the industrial land vacancy rate has improved nationally and in Sydney over recent years, it remains “well behind international rates and below the ideal market level.”
A spokesperson for Transport for NSW added,
“The increasing demand on freight, from both increasing population and changing consumer patterns, will continue to drive the need for more industrial land for high volume logistics handling, and localised distribution centres across Sydney.”
The agency warned that fragmentation of freight activities caused by competing land uses could increase business costs and consumer prices, emphasizing the need for coordinated government policy to strategically manage land use.
The peak industry body for datacentres, Data Centres Australia, reported that the vacancy rate is now close to 4%, citing recent data.
Its chief executive, Belinda Dennett, stated that supply is responding with “strong new development and continued logistics investment in western Sydney.”
“The answer is to release and service more land and plan it well, putting the right uses on the right land, so freight keeps the transport-connected sites it depends on while datacentres deliver the investment, jobs and infrastructure they bring, and continue to invest in energy and water infrastructure that supports the broader ecosystem.”
Dennett agreed that Sydney requires a coordinated approach to industrial land use and emphasized that the situation is not a competition between the two sectors.
Transport for NSW’s concerns are supported by the Australasian Supply Chain and Logistics Association (ASCLA). Its chief executive, Steven Ballerini, reflected the group’s perspective:
“We’re not opposed to datacentres as they’re critical infrastructure for the digital economy. But they are now competing directly with freight and logistics for the same well-located industrial land, and that’s a competition with real consequences.”
“Unlike a datacentre, a distribution centre has to sit close to the population it serves; you can’t simply move it to the urban fringe without adding cost, distance and emissions to the supply chain.”
Reserve Bank Raises Inflation Concerns Over Datacentre Investment
The Reserve Bank of Australia (RBA) board has also cautioned that rising investment in datacentres could contribute to inflationary pressures and has already influenced upward movements in interest rates globally.
Datacentre spending accounts for a growing portion of Australia’s investment in machinery and equipment, which was the largest contributor to economic growth in early 2026. The Australian Bureau of Statistics reported on Wednesday that commercial and industrial building approval values reached a record high in May, driven by new datacentre projects.
Minutes from the RBA’s June meeting, released on Tuesday, revealed that the strength of business investment surprised the board. The board discussed risks that the construction boom could exacerbate skills shortages, noting that construction costs were already elevated and workers scarce before datacentre projects began hiring.
Pat Bustamante, a senior economist at Westpac, explained that the RBA might need to raise interest rates to curb spending in other sectors if datacentre investment competes for land and resources, thereby pushing up prices.
“The RBA essentially will have to make room for this expansion because this expansion isn’t really interest [rate] sensitive,”
Bustamante added that home building would likely face the most pressure if costs or interest rates increase further.
Community Groups and Politicians Call for Moratorium
Community groups across New South Wales, Victoria, and Western Australia have united to urge state and federal governments to halt approvals of new datacentre developments until stronger protections for communities, cultural heritage, and the environment are established.
One such group, the Lane Cove Responsible Planning Group, has highlighted plans for five datacentres in the northern Sydney suburb, which would occupy 40% of its industrial land.
“[Datacentres] take up space that could be used for other community infrastructure, green spaces and housing,” the alliance stated. “And they contribute to greenhouse gas emissions and climate change.
“Our existing planning systems were never designed to assess or manage hyperscale AI infrastructure and the pressures they put on energy and water systems and the community.”
The alliance has called for governments to establish appropriate regulations before approving additional datacentre projects.
Federal Labor backbencher Ed Husic also expressed concerns about datacentres occupying land that could otherwise be used for housing.
“There’s been a bit of a frenzy going on with datacentre builds … Land gets snapped up that should have been set aside for houses, and we’ve already got 90,000 workers short in construction,”he told on Tuesday.
“So if we are having a situation where datacentres are now taking up land for homes, we’ve got to pump the brakes on this.”
The assistant minister for the digital economy, Andrew Charlton, emphasized that the government’s top priority remains building new homes.
“States and councils need to prioritise housing in their local planning decisions,”he said.
“The collective task of policymakers is to ensure investment in datacentres work in the interests of Australians, not the other way around.”
Dennett stated that communities deserve meaningful input regarding developments in their vicinity but argued that a moratorium would be counterproductive.
“Datacentres in Australia are already assessed through rigorous, independent planning that requires environmental assessment, community consultation, cultural heritage protection and binding conditions of approval, and they can only be built on industrial and employment land,”she said.
“A blanket pause would freeze the whole industry to legislate safeguards that for the most part already exist, while sending the investment, the jobs and the local infrastructure these projects bring to other countries.”
