SYDNEY — The Reserve Bank board has warned that rising investment in datacentres could add to inflation and has put upward pressure on interest rates worldwide. The board also noted that datacentre spending was the largest contributor to economic growth in Australia during early 2026.

Commercial and industrial building approval values reached a record high in May 2026, primarily due to new datacentre projects, according to the Australian Bureau of Statistics. Minutes from the Reserve Bank board's June 2026 meeting indicated that the extent of business investment surprised the board, which discussed the risk that datacentre construction could worsen existing skills shortages, given that construction costs were already elevated and a lack of workers was apparent.

Pat Bustamante, a senior economist at Westpac, stated that the Reserve Bank would increase interest rates to reduce spending in other areas if datacentre investment competed for land and resources, thereby driving up prices. Bustamante also said that home building would face the most pressure if costs or interest rates continued to rise.

Community groups in New South Wales, Victoria, and Western Australia have jointly requested that state and federal governments temporarily halt the approval of new datacentre developments. They seek stronger protections for communities, cultural heritage, and the environment. The Lane Cove Responsible Planning Group reported that five datacentres are planned for the northern Sydney suburb, which would occupy 40% of its industrial land. An alliance of community groups stated that datacentres consume space that could otherwise be used for other community infrastructure, green spaces, and housing. These community groups also stated that datacentres contribute to greenhouse gas emissions and climate change.

Belinda Dennett, chief executive of Data Centres Australia, said supply is responding with substantial new development and ongoing logistics investment in western Sydney. Data Centres Australia cited CBRE research indicating that the industrial land vacancy rate was close to 4%. Dennett also stated that a moratorium on datacentre approvals was not the appropriate solution.