An inquiry in New South Wales, Australia’s most populous state, has found that existing data centre approval processes do not adequately account for the combined impact of facilities on water, electricity and infrastructure. However, the inquiry stopped short of recommending a moratorium on new projects.
The report by the New South Wales cross-party inquiry said the state lacked a coordinated strategy to manage the expansion of data centres. It warned that current planning guidelines may underestimate future electricity demand and water supply constraints, while the concentration of multiple facilities in one area could increase pressure on infrastructure and local communities.
The report noted that data centres are primarily assessed as individual developments, even though their effects can accumulate across regions and industries.
“The current planning framework assesses data centres primarily as individual developments despite many impacts being cumulative in nature,” the report said.
The committee instead called for a comprehensive data centre strategy and better coordination among the organisations involved in the approval process.
A proposal to recommend state and national moratoriums on data centre approvals was removed from the final recommendations. Minutes attached to the report showed that committee members voted 6-1 to remove the proposal, which would have paused approvals until social and environmental impacts were fully understood.
Committee chair Abigail Boyd, a Greens party member of the New South Wales upper house, was the only member who voted to retain the moratorium recommendation. In the report’s foreword, she criticised what she described as an “AI-fuelled data centre frenzy” and warned about the scale of energy and water required to support the expansion.
The findings come as data centre development faces growing scrutiny from communities and policymakers. In New South Wales, developers NextDC and OpenAI are awaiting approval for a data centre project. Residents in one suburb have also prompted the withdrawal of a smaller development.
The inquiry highlights the need for governments to assess the wider resource and infrastructure requirements of data centre expansion as demand for AI computing continues to grow.
