Data centres drive record $6 billion investment boom
The Iran war appears to have little impact on Australia’s data center boom, but households are starting to feel the pinch.
Private capital spending rose 6.5 per cent in the first three months of 2026, shattering consensus expectations for a 1.2 per cent increase, the Australian Bureau of Statistics reported on Thursday.
This was driven by spending on information media and telecommunications equipment nearly tripling in the quarter to a record $6 billion.
ABS head of business statistics Tom Lay said this showed a similar increase in the three months to September 2025.
“The increase in investment was the result of investments in data center equipment, especially server racks and processing equipment, significantly increasing the overall investment figures,” Mr Lay said.
Finance Minister Jim Chalmers said billions of dollars were flowing into more productive investments, which was good news for the Australian economy.
“Such infrastructure projects are a priority of our government and clearly a priority of the private sector as well,” he said in the statement.
AMP deputy chief economist Diana Mousina said overall the figures showed continued private business investment in Australia, which was good news for growth prospects.
“However, cross-sector expansion could be beneficial, especially as manufacturing continues to contract and mining stagnates,” he said.
Belinda Allen, Commonwealth Bank’s head of Australian economies, said beyond data centres, Australia’s investment outlook looked weak due to high interest rates and offshore uncertainty.
While the data center boom continued to support business investment, households were beginning to shake as a result of the conflict in the Middle East.
Household spending fell 1.1 per cent in April, following a 1.6 per cent increase in the previous month, according to ABS data.
This was the steepest monthly decline since October 2023, but was largely driven by cheaper travel costs as a result of government fuel consumption cuts and free public transport in Victoria and Tasmania.
Empirical data produced by the bureau suggested that the volume of fuel expenditures actually increased by two per cent in April.
Even excluding travel expenses, the figures show growing weakness in the economy.
Discretionary spending fell 0.8 percent, driven by declines in spending on clothing, services and air travel; however, some of this was due to refunds from canceled flights.
ANZ Australia chief economic officer Adam Boyton said the weakness in spending was consistent with other recent soft economic indicators, including fragile consumer confidence, lower tender approval rates and slightly better than expected inflation data for April.
“Secondly, it shows that companies may have difficulty passing on price and cost increases to consumers,” he said.
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