The Federal Government is planning to ban data centres from being built in suburban areas.
Sources for the Government told The Australian Financial Review (AFR) about the policy, but have not otherwise publicly confirmed it.
A consultation paper released in September asked for community feedback on how close data centres should be to homes and schools.
Legislation on data centres is expected to be introduced in early 2027.
Data centres
Data centres are large warehouses filled with computer servers.
They typically contain rows of tall metal racks, each holding dozens of computers, with indicator lights and hundreds of cables connecting the equipment.
The demand for data centres has exploded due to the widespread adoption of AI.
AI companies such as OpenAI and Anthropic need data centres to develop their models.
Data centres are also used to answer prompts in real time.
Govt ban
The AFR reported on Friday that the Government will ban data centres from being built near suburban homes, citing anonymous sources.
The Government has not publicly confirmed the ban.
However, it did release a consultation paper last month proposing large data centres be located away from “sensitive community areas” where their impacts cannot be avoided.
The paper sought feedback on the minimum distance between data centres and homes and schools.
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It’s understood the approval of new data centres would remain with states and councils, and the rules would only apply to new proposals.
Public consultation ended on 9 October.
The Government has previously said it will introduce legislation around data centres in early 2027.
Controversies
Data centres have drawn criticism over energy and environmental impacts.
Australia’s energy operator, AEMO, forecasts data centres will use around 13% of the electricity supplied by the National Electricity Market (the grid covering Australia’s south-eastern states) by 2036, up from around 3%.
In 2025, the ABC obtained documents under Freedom of Information laws showing 19 data centres had applied to use close to 20 gigalitres of Melbourne’s drinking water a year.
Critics say data centres will increase the utility bills of the local community.
Backlash
Many local communities around Australia have opposed the construction of data centres in their neighbourhoods.
On Friday, a group of local councils in Victoria called for a pause on approving new data centres until the State Government can effectively assess their impacts.
The Victorian Government has already announced plans to ban new data centres near schools and childcare centres, as well as in rural areas that cannot support them.
In August, residents of the Melbourne suburb of Yarraville blocked workers from installing power poles intended to supply power to a nearby data centre.
Locals nicknamed the NEXTDC-operated centre “Mordor”.
The installation of the large poles has since been paused.
