00:00Australia is emerging as a preferred location for AI data centres.
00:04The Financial Review reporting that Anthropic is preparing to make the country its second home for training its AI models
00:09ahead of its IPO.
00:11The US startup reportedly seeking 1.4 gigawatts of capacity, equivalent to the entire Australian industry's capability as of the
00:17end of last year.
00:18Let's talk about the opportunities with our next guest.
00:21John O'Mahony is the partner at Deloitte Access Economics.
00:26Great to have you with us.
00:27So it's really interesting the timing of the Anthropic News, of course, but it just sort of adds to the
00:32evidence of how much demand there is.
00:36It's already happening now, Heidi.
00:38We're already seeing it's not just an opportunity.
00:40The scale of investment in data centres in this country is very significant.
00:46It's as big as what Australia experienced a decade or two ago through a mining boom.
00:51We're going through a data centre boom at the moment.
00:53Just to give you a couple of figures, the amount of capital investment in this country that's now going through
00:58technology has doubled from 5% to 10% of the total.
01:02We had one quarter earlier this year, Heidi, where we had over 10 billion US dollars straight into data centres
01:08in this economy.
01:09So it's a very significant change for us.
01:11Are you of the opinion that that opportunity will be seized upon?
01:15Well, we describe it as being a sliding doors moment for the Australian economy because there are a lot of
01:21strengths for Australia, for investors, whether it's about access to land, about the renewable energy opportunity, the talent that we
01:30have in Australia for artificial intelligence and what it means.
01:33But we're also aware that investors are concerned about whether or not they will get the approvals in time that
01:41they need to seize the opportunity.
01:43And of course, Australia is competing with Singapore, Malaysia, Japan, India to being one of the data centre hubs for
01:51the Asia Pacific region.
01:52So with the right policy support and the right conversations with investors, we think this can be the next big
02:00economic opportunity for Australia.
02:02But time will tell about whether we'll seize it.
02:04Well, it's really interesting.
02:05We had a conversation recently with a very well-placed consultant coming from the US who was here for talks
02:13pertaining to these opportunities.
02:15And there's a pretty kind of bearish view as to whether it will eventuate because there's a sense of like
02:20it's just not going to happen because nobody wants these David centres.
02:24There's, you know, NIMBYism, as you will, and that our government is eventually going to have to heed those more
02:31populist concerns.
02:33Right. Is that the biggest risk?
02:34It's the most significant risk is that that causes delay.
02:38Those are issues that can be worked through.
02:41But the question is, will Australia resolve them in time for the investment to happen now?
02:45Because if we miss the opportunity, it goes elsewhere.
02:47Well, then the opportunity mightn't be around in four or five years.
02:51What I think will help with that is guidance from the Australian government called the data centre principles.
02:56And this is an invitation for investors to say, come and speak to us about how you'll meet our requirements
03:02around using renewable energy infrastructure,
03:05not putting a burden on local communities and helping to build the artificial intelligence ecosystem around data centres.
03:13And then this country wants that investment.
03:15So I think that there are enough messages from government to keep investors interested in Australia.
03:21You talk about green compute, which and you mentioned the sort of environmental concerns.
03:26A lot of the concerns at the moment globally is about the energy suck, right?
03:29Does Australia have the infrastructure capability and the policy framework to be able to address those worries?
03:36We don't have the energy at this stage, but we do have a framework for attracting the investment.
03:41So one of the key data centre principles is that we are building out the renewable energy capacity in this
03:47country.
03:47We think that the data centre boom can help the transition because by having long term contracts,
03:53it can provide more certainty to renewable energy providers as well.
03:57So there is an opportunity there, but there's a coordination challenge for the Australian economy.
04:02Is there an ideal investment model?
04:05Are these PPIs that you're thinking of?
04:07Is it going to be a more private investment?
04:10How big a role should the government have in this, do you think?
04:13For government, it's mostly about getting the policy settings right and encouraging the investment.
04:18After that, the government already has its state-owned corporations in energy and water
04:24who are the right partners for hyperscalers or other investors in data centres
04:29to be able to get the energy and water needed for this scale of investment.
04:33So we do feel as though there are regulators and state-owned corporations that can participate in that.
04:40It's not as though the government has to directly invest, but it has to provide the right policy framework.
04:45And it's also got to encourage the investment because for Australia to compete with other regions,
04:51it's going to have to require ministerial-level interest in this investment.
04:57But we've already seen that before.
04:58When there have been big investments in Australia, whether it's the Minister for Communications,
05:03the Prime Minister, the Treasurer, they've been part of the announcements as well.
05:07I suppose would it make it more appealing if there was more a public vested interest?
05:13Because obviously the criticism of the mining super cycle, for example,
05:16oil and gas talks about tax revenues not benefiting the public purse.
05:21Is that an opportunity that structurally the government should make more of here?
05:26If you're saying that this is the next big thing comparable to what we saw with the mining boom?
05:32Yeah. Taxation is absolutely part of the conversation.
05:35We think the biggest thing for governments to get right, to demonstrate the benefits to the Australian community,
05:41is about the broader AI ecosystem.
05:43So, yes, it's data centres, but what sits around that?
05:47Whether it's the submarine cables, the enabling telecommunications infrastructure,
05:51and then building an ecosystem with more AI startups in this country,
05:55supporting research institutions, attracting talent,
05:58so that we have the high-skilled, high-wage jobs that data centres can help enable.
06:04So, it's not just data centres, but it's a whole transformation for the Australian economy.
06:09John, really great to have you with us.
06:10It was really insightful.
06:11John O'Mawony, who's a partner at Deloitte Access Economics,
06:15and we do have more on Australia Ahead every Tuesday at 10.40am.
06:18If you're watching here in Sydney, 8.40am in Hong Kong.
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