Data centres have become the hidden infrastructure powering almost every aspect of modern life — from online banking and streaming services to artificial intelligence. But as Australia races to become a global hub for the digital economy, a growing number of communities are questioning whether the benefits outweigh the environmental and social costs.

The rapid expansion of the industry is transforming landscapes, increasing demand for electricity and water and fuelling local opposition to developments planned near homes and farmland.

At the heart of the debate is a fundamental question: how much is Australia willing to sacrifice to power the AI revolution?

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For Southern Highlands cattle farmer Ros Murphy, the issue has become deeply personal.

Reporter Sarah Greenhalgh with farmer Ross Murphy Credit: 7NEWS

Her family has bred beef cattle on the same property near Moss Vale since 1927. The farm represents generations of history, hard work and resilience. Now, she fears its future could be threatened by plans for a large data centre and gas-fired power station nearby.

“I know nothing about AI,” Murphy said. “To me AI means artificial insemination.”

She worries that emissions from the proposed development could contaminate her livestock and jeopardise the farm’s future.

“If they’re eating it and drinking it every day and it’s going into their bodies, it’s going to leave a residue,” she said. “The meatworks won’t take them.”

The invisible infrastructure behind the internet

Despite their low public profile, data centres underpin almost every digital interaction.

Professor Ali Mirjalili, an AI researcher at Torrens University, says they have become as essential as roads, airports and rail networks.

Professor Ali Mirjalili, an AI researcher at Torrens University Credit: 7NEWS

“Every time we use social media, every time we use our banking system, our government websites, data centres are doing the job behind the scenes,” he said.

The next generation of facilities goes even further.

“We don’t even call them data centres,” Professor Mirjalili continued. “We call them hyperscale AI factories because technically they manufacture intelligence. They don’t just store data.”

Australia currently has around 160 operational data centres, with another 90 proposed or under construction. Most are located in major cities where access to power, telecommunications infrastructure and customers is strongest.

Professor Mirjalili says Australia’s political stability, available land and renewable energy potential make it an attractive destination for global investment.

Billions flowing into Australia’s digital economy

Investment is surging.

Australia was the world’s second-largest destination for data centre investment last year, behind only the United States.

Belinda Dennett, founder and CEO of industry body Data Centres Australia, says the facilities are critical to supporting everyday services.

“Your Netflix, your Spotify, your email, your cloud, your OpenAI prompts — all that happens in the servers and chips you see here,” she said during a tour of one facility.

Belinda Dennett, CEO Data Centres Australia Credit: 7NEWS

Dennett argues the industry represents a major economic opportunity and positions Australia to compete in the global AI race.

“If Australia wants to be in this market, we need to move quickly,” she said.

Power demands spark concern

The industry’s rapid growth is also driving unprecedented demand for electricity.

Data centres currently consume around 2 per cent of Australia’s electricity. By 2030, that figure is projected to rise to around 6 per cent, with some forecasts suggesting demand could reach between 10 and 15 per cent by 2040.

Professor Mirjalili warns Australia is not prepared.

“We simply do not have proper infrastructure and we don’t generate enough electricity to be able to power these hyperscale data centres,” he said.

He likens the facilities to “spaceships” landing in Australian cities.

“When you’re talking about a few hundred households, which used to be the case in traditional data centres, it wasn’t an issue,” he said. “But if you bring 10 of those spaceships, it’s like you’re adding five million or 10 million new households. Can we manage that? I don’t think so.”

Professor Mirjalili also warns that, without major investment in energy infrastructure, Australians could ultimately face higher electricity prices.

“There are no laws requiring them to source new energy,” he said. “They heavily rely on existing water and electricity infrastructure.”

Dennett argues the solution is not slowing construction but accelerating investment in energy generation.

“What we need to do is speed up sorting out the power issue,” she said.

A government spokesperson told us: “Data centres are one of the biggest drivers of new energy demand. We’re acting to make them an asset to the energy grid, not a strain.”

“If data centres want to benefit from Australia’s energy grid, we think they should do their bit to strengthen it. It’s clear that the overwhelming majority of states agree.”

Water use under scrutiny

Cooling thousands of servers also requires significant amounts of water.

Sydney’s data centres currently consume about 3.5 billion litres of drinking water annually, although Sydney Water has projected demand could rise sharply over the next decade.

Dennett disputes those forecasts, arguing they are based on maximum peak demand rather than actual annual usage.

“That’s not how it works,” she said.

Communities push back

In Melbourne’s West Footscray, locals say the expansion of nearby data centres has exposed shortcomings in Australia’s planning system.

Resident Sebastian Leith says he accepts data centres are necessary but believes they should not be built so close to residential neighbourhoods.

Reporter Sarah Greenhalgh with West Footscray resident Sebastian Leith Credit: 7NEWS

“They’re a necessary evil,” he said.

“They could do so much for Australia. This one in particular has been handled so badly.”

Residents have raised concerns about construction disruption, noise, pollution, blackouts and impacts on property values.

Sean Brown, who lives near a facility owned by Australian company NEXTDC, says community consultation has been inadequate.

“Non-existent,” he said.

“No one from the data centre industry has contacted us.”

Sean Brown, West Footscray resident Credit: 7NEWS

Brown has also been monitoring air quality around the site because of concerns over emissions from diesel backup generators.

“No Australian child should be exposed to this risk just so people who don’t live here can make millions of dollars,” he said.

NEXTDC said it operated the generators under “established operational procedures”, adding that the activities were carried out in line with “relevant planning approvals, environmental requirements, safety regulations and compliance obligations.”

Moss Vale proposal raises environmental concerns

In Moss Vale, community opposition centres on a proposal to power a major data centre using three gas-fired power stations.

If approved, it would become one of NSW’s largest gas-powered facilities.

Greens councillor Heather Champion argues the proposal is incompatible with Australia’s climate commitments.

“Why would we build a gas plant that’s going to be pumping out two million tonnes of carbon emissions every year?” she said.

The site’s owner, Nakar Property, declined an interview but states in planning documents that renewable energy options were considered before gas was deemed the most suitable solution. The company says predicted emissions are unlikely to create unacceptable environmental impacts.

Balancing opportunity and impact

As artificial intelligence becomes increasingly embedded in everyday life, Australia’s digital infrastructure will continue to expand.

Supporters argue data centres are essential to economic growth, technological innovation and national competitiveness.

Critics say the industry must not outpace planning, infrastructure and environmental safeguards.

Professor Mirjalili believes the answer lies somewhere between the two.

“We need to be moving fast,” he said.

“But we need to be moving very cautiously at the same time.

“We don’t want to compromise our natural resources at the cost of these data centres.

“It’s a good opportunity, but it should be managed properly.”

You can watch The Revolution: Inside Australia’s Data Centre Boom on 7plus

Full statement from NEXTDC:

M3 Melbourne is equipped with backup diesel generators to support the continuity of critical digital infrastructure and services relied upon by businesses, government and the broader community in the event of a disruption to grid power.

NEXTDC operates these systems under established operational procedures and undertakes routine testing and maintenance activities to ensure operational readiness. These activities are conducted in accordance with relevant planning approvals, environmental requirements, safety regulations and compliance obligations. We continuously monitor and manage our operations to support the safe, reliable and responsible operation of the facility.

Safety has always been a core priority for NEXTDC and is embedded throughout every part the design, construction and operation of our facilities. Through rigorous engineering standards, comprehensive risk management practices and ongoing engagement with regulators and emergency services, we maintain multiple layers of protection to support the safe, resilient and reliable operation of our critical infrastructure.

Regarding the transformer explosion (which occurred in West Footscray June 7th, 2026), NEXTDC understands there was an interruption to mains power experienced as a result of an external electricity network incident in the surrounding area. NEXTDC can confirm there was no incident within the M3 Melbourne data centre in West Footscray that contributed to this incident.

In accord with delivering 24/7 power availability, NEXTDC’s backup power systems responded immediately, maintaining uninterrupted operations throughout this external supply incident. Once the energy provider restored mains power, the M3 Melbourne facility seamlessly transitioned back to normal grid supply. This event was not caused by NEXTDC and as noted did not occur within the M3 Melbourne facility.