Australia’s AI & data centre plan sparks calls for energy reform

The Australian Government's newly released National AI and Data Centre Plan has prompted a spectrum of responses from technology providers and business representatives, focusing on the plan's implications for energy use in data centres and the unique challenges faced by the country's small businesses as they seek to harness AI.

Energy pressure

Australia's ascent in the data centre market is putting pressure on national energy infrastructure, industry leaders warn. AI-led workloads are contributing to rapid increases in power demand, intensifying challenges faced by operators and policymakers alike.

"Australia, like the rest of the world, is already seeing AI ambitions collide with energy realities. With one of the fastest-growing data-centre markets globally, now ranked in the top three in APAC by capacity alongside China and India, Australia is facing a sharp rise in power demand driven by AI workloads. As national grids come under unprecedented pressure, power, not performance, will become the ultimate constraint on innovation."

"More than perhaps any country, Australia's data-centre industry must evolve into energy-aware ecosystems, where every watt counts. Technologies such as modular design, advanced cooling, flash-optimised architectures and intelligent workload placement will define competitiveness and, as Australian Energy Market Operator (AEMO) warned this week, essential to avoiding power instability and outages," said Mark Jobbins, Vice President and Chief Technology Officer, APJ, Pure Storage.

Jobbins highlighted the importance of the government's plan while urging a shift towards enforceable national standards on energy efficiency and greater coordination across jurisdictions. He emphasised that a detailed implementation would be critical for success, outlining potential complications in aligning state-level standards and incentives with overarching federal aims.

"This will not be simple. The success of the National AI and Data Centre Plan will depend on the detail: how governments ensure operators adhere to consistent, enforceable energy-sustainability requirements; how those standards align across States; and how planning and approvals reward efficiency rather than pure capacity," said Jobbins.

"Investors and regulators must also require that every AI strategy is paired with transparent, accountable energy-sustainability policies, including the design and location of data centres. Energy is becoming the new currency of digital progress, reshaping how nations design, deploy and differentiate their technology strategies. Australia now has a strong opportunity to lead in this transition," said Jobbins.

Small business gap

Xero's leadership has welcomed some principles of the National AI Plan but expressed reservations about its effectiveness for small businesses. While the plan recognises disparities in digital access and steers clear of excessive regulation, critics argue the emphasis on training does not address the practicality of adoption for the nation's 2.6 million small businesses.

"The government's new National AI Plan offers a curriculum when what small business needs is a catalyst. By assuming that education alone will drive the P&L benefits required to support the 'backbone of the economy,' the plan ignores the massive gap between knowing about AI and actually deploying it. We welcome the plan's ambition, particularly the absence of heavy-handed regulation and the acknowledgment of the digital divide facing regional and First Nations communities. Credit is due for getting those foundations right. However, a focus on 'training' misses a fundamental reality: Australian small business owners don't have time for homework. They are uniquely time-poor," said Angad Soin, Managing Director AU/NZ & Global Chief Strategy Officer, Xero.

Soin pointed to research indicating almost one in four small businesses in Australia lack time to learn about or experiment with AI tools-double the rate in comparable international markets. He warned that relying on education alone could entrench a "two-speed economy", with only early adopters realising gains from AI.

"If a policy requires a cafe owner working 60 hours a week to find time for a webinar, it will fail small businesses. We risk sleepwalking into a two-speed economy. While early adopters see revenue growth, the majority (54%) mistakenly believe AI disappearing would have 'no impact' on them. This 'readiness gap' isn't apathy-it's a lack of accessible tools," said Soin.

Policy priorities

In response, Xero is calling for a shift in policy focus from education to practical adoption measures. Soin proposed three priority actions: grants to fund the purchase of secure software with built-in AI features, the creation of a vetted marketplace for trusted AI tools supported by government co-funding, and time-limited tax incentives for small business software subscriptions.

He noted that closing productivity gaps between small and large businesses would deliver significant economic benefits. "The technology exists. The desire is there. We just need policy that gives small business owners back their most valuable asset: time," said Soin.