Australia’s AI ambitions add to construction squeeze as housing target looms

SYDNEY – Australia’s push to become a regional artificial intelligence powerhouse is testing its ability to deliver on another national priority: building enough homes.

Canberra has been keen to accelerate AI investment and the growth of data centres. Australian Prime Minister Anthony Albanese on July 15 announced a new Office of AI, alongside measures to streamline energy, water and copyright rules for data centre developers, which could help the country compete for regional digital infrastructure investment.

At the same time, the government remains committed to delivering 1.2 million new homes by mid-2029 under the National Housing Accord, its flagship response to a worsening housing affordability crisis. Housing completions are tracking nearly 200,000 homes short of the target.

Strong economic growth, high rates of immigration and, until recently, low interest rates have pushed up housing prices across the nation of 28 million people. Australia has some of the world’s most expensive real estate, pricing many young adults out of the market and worsening inequality.

Economists, builders and recruiters say the expanding pipeline of data centres is adding demand for specialist construction workers in a sector already stretched by housing, renewable energy, transmission and transport projects.

“Data centres are not super labour-intensive,” Timothy Hibbert, head of property and building forecasting at Oxford Economics Australia, told The Straits Times. “But they are putting substantial pressure on very particular trades or very particular skill sets.”

Data centres are unlikely to derail housing construction on their own, but they risk becoming the latest strain on a construction workforce already stretched thin.

Infrastructure Australia forecasts a construction workforce shortfall of about 300,000 by 2027, meaning that even modest demand for electricians, HVAC (heating, ventilation and air-conditioning) specialists and project managers adds to pressures already threatening the housing target.

Real competition

Australia’s data centre pipeline is expanding rapidly, driven by global technology companies and regional investors drawn to land and power that are harder to secure elsewhere.

Not all of the projects are likely to be built. But there are some ambitious plans across the country, with state governments vying to attract major investments.

Among the latest is a planned A$40 billion (S$36 billion) data centre campus near Darwin that would be powered by up to two gigawatts of on-site gas-fired generation, the proposing company Beetaloo Energy has said.

Global directory Data Center Map counts 290 data centres under construction or in planning across Australia, including 93 in Sydney and 56 in Melbourne.

A report by consultancy Mandala Partners, commissioned by five of the country’s largest data centre operators, forecast investments of more than A$26 billion in Australian projects by 2030, with capacity more than doubling from 1,350MW in 2024 to 3,100MW.

The investment is being driven by global technology companies such as Microsoft and Amazon Web Services, alongside regional players including Singapore’s Keppel and DC Alliance.

Earlier in 2026, Keppel secured the rights to a 123ha site in Victoria state. The site is capable of supporting what could become one of Australia’s largest data centre campuses.

Keppel and DC declined to comment.

The competition for labour is already visible in the recruitment market. David Keegan, a director at New Venture Recruitment, said demand for electrical, mechanical and commissioning professionals had climbed sharply, with project manager salaries up 15 per cent to 20 per cent in the past year.

“Sydney and Melbourne are the two cities where we’ve seen the biggest increase in those (data centre) projects so far in Australia,” he told ST. “If I was going to put a number on it, I’d say it’s probably close to doubled.”

The pressure extends beyond labour. In June, data centre operator NextDC paid about A$165 million for land at Lovely Banks near Melbourne that had previously been identified for residential growth, prompting the city of Greater Geelong to seek tighter oversight of data centre approvals in housing corridors.

The Housing Industry Association (HIA) said the issue extends beyond land use because Australia was already facing a shortage of around 83,000 skilled tradespeople to meet the federal government’s housing target.

“The pressures are already highly pronounced, and one of the biggest challenges is having the skills available to build them,” said Simon Croft, HIA’s chief executive for industry and policy.

“These projects for data centres, alongside the other large infrastructure projects under way around the country, are putting intense pressure on the same pool of potential workers.”

Consultancy Turner & Townsend recently found that Australia and New Zealand are the world’s most labour-constrained construction markets. Data centres make up the single most capacity-constrained sector, competing for trades with hospital build, defence projects and preparations for the 2032 Brisbane Olympics.

Not everyone believes data centres pose a significant threat to housing construction.

M. Reza Hosseini, a senior lecturer at the University of Melbourne, said there was little evidence that data centres were directly diverting workers from residential projects, noting that much of the capital expenditure on new facilities goes towards imported equipment rather than labour.

“I don’t think they’re competing with the housing sector in any meaningful way at the moment,” he said. “But if multiple large projects are concentrated in the same location, you can see localised pressures emerge.”

Race against time

Regardless of the degree of overlap, several experts say the government is pursuing both ambitions without a clear workforce plan.

Albanese’s AI policy announcement said nothing about labour capacity, even as the industry calls for prioritising workforce development to avoid stalling the investment pipeline.

The migration system on which the housing and AI sectors rely is not filling the gap. HIA says less than 2 per cent of recent skilled migration has flowed into construction, and recruiters say the slow visa process can take up to 12-month turnarounds to bring in experienced overseas professionals.

Data Centres Australia estimates that the data centre sector’s permanent jobs will nearly double from the existing 9,600 by 2030, although temporary employment during the construction phase could be up to 15 times that number.

Chief executive officer Belinda Dennett said the sector is particularly concerned about shortages of electricians and high-voltage workers.

Rather than poach from elsewhere, it is working to expand the pipeline through programmes including the Microsoft Academy, which trains workers in Sydney and in Melbourne, and the Victorian state government’s 2,000 new electrician apprenticeships.

“We want to work constructively with the unions, with training providers, with universities, with TAFEs, with industry, to build the workforce,” she said. “We think this is a fantastic opportunity for Australian workers.” TAFE, or Technical and Further Education, is the vocational education and training system run by the federal government.

Whether those efforts can outpace demand remains an open question.

Another question mark hangs over the impact of Albanese’s statement that data centre developers will have a legal obligation to meet their own energy needs by underwriting new renewable supply, such as solar, wind and battery storage – and paying for grid connections. This might create additional demand for electricians and high-voltage technicians.

For now, the scale of AI investment appears to be outpacing Australia’s ability to train the specialist workforce needed to support it.

Oxford Economics’ Hibbert said: “There’s no real relief in the short term or medium term. I think we’ll still be talking about trade shortages well into the 2030s.”