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Australia—AI investment boom brings export opportunities and risk
A global investment boom in AI-related infrastructure is driving global growth and expanding Australian export opportunities. Capital largely flows to locations where enabling conditions are strongest, currently the US and China, which lead in AI infrastructure and data center capacity. That said, Australia’s abundant renewable energy, stable regulatory environment and skilled workforce make it an attractive location for regional infrastructure. Indeed, Australian capital expenditure in information media and telecommunications rose 27% y/y to a record $12.9 billion FY2025 (Chart), contrasting against growth below 4% across all sectors. Australia now hosts 282 data centres, making it a top 10 country by number of centres (despite lagging on computational power and scale). This should support continued strong growth in Australia’s ICT services exports ($4 billion or 3% of services exports in FY2024). Rapid growth in AI-related physical infrastructure also supports demand for copper and critical minerals used in network construction and energy supply systems dominated by renewables. Global power demand from data centers is expected to double by 2030.
Labour market impacts will vary by sector and function, but historically, labour-creating effects of new technology have outweighed displacement. AI’s impact on the labour market will be fourfold: 1) direct replacement of labour through automation, 2) creation of new tasks and roles, not currently performed by human workers, 3) increased productivity of existing workers and demand for workers in complementary non-automated tasks, and 4) firms passing AI-gains through lower prices and higher real wages. While longer term productivity gains and economic benefits are expected, the risk of AI asset repricing is a key downside risk to the global economic outlook given elevated valuations and concentrated equity benchmarks. This would heighten financial stability risks and is particularly acute where debt is highly leveraged.
