Australians are yet to see the benefits of AI and datacentres – and US midterms show they could be political kryptonite

The Australian government, led by Prime Minister Albanese, faces challenges in demonstrating the benefits of AI and datacentre investments for ordinary voters. So far, the positive impacts of this technological boom have been limited to potential changes in copyright laws, special rules on power and water usage, and concerns over job displacement.

However, the Reserve Bank of Australia (RBA) has warned that datacentres are contributing to inflationary pressures, prompting an 18-year high in interest rates. This has raised questions about when the government will see the upside of this development. The political climate, as shown by the US midterms, has made datacentres a potential "kryptonite" for voters who are not convinced by the promise of AI growth.

The RBA Governor, Michele Bullock, has cautioned that "some pain now will prevent even worse pain" in the future, but has not clearly stated when the benefits of AI and datacentres will materialize. Deloitte Access Economics recently reported that Australia's investment pipeline for datacentres stands at $1.39tn, with 37 projects totaling $141bn in investments.

While this investment is expected to bring substantial construction gains, it may not lead to a significant economic payoff due to the rapid increase in costs and limited capacity to absorb the surge in demand. The RBA has highlighted that "AI-related investment is driving rapid growth in prices for technology-related goods," but has not provided a clear timeline for when these benefits will be realized.

In response to these concerns, some experts have suggested alternative approaches, such as temporary progressive changes to income tax or superannuation, as well as taxes on windfall profits and gas exports, to help curb spending and address inflationary pressures.