A data centre boom is underway that promises to help drive Australia’s economic growth.  We’re seen as a key location for the data centres that drive the latest AI technology.  But a lot of the revenue generated by the multinational big tech firms won’t come anywhere near Australia, so should the taxpayers hosting the data centres get a bigger cut of the profits? Today, independent economist Saul Eslake on how we’re cashing in on AI. Featured:  Saul Eslake, independent economist Subscribe to ABC News Daily on the ABC listen app.Program:More from ABC News DailyAustralia, Information Technology Industry, Technology, AI, Data Centres, Water Supply, Electricity Production and Distribution, TaxTranscriptSam Hawley: In the early 2000s, we had the mining boom. Now it looks like we're embarking on a data centre boom. It's helping drive our economic growth. So should we as taxpayers be getting a bigger cut of the profits? Today, independent economist Sol Eslake on how we're cashing in on AI. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily. Saul, every time we type a question into chatbots like ChatGPT or Claude, which at this point many of us are doing a lot, there's a data centre involved, isn't there, working very hard behind the scenes?Saul Eslake: That's my understanding. Most of us, I think, are using fairly simple versions like the app that comes up these days when you Google something, but they do go to a data centre somewhere and come back with something that purports to be an answer to your question.News report: From the country to the city, AI data centre developments are accelerating. Industry figures show there are already 162 operating across the nation.News report: In New South Wales, the state has declared it is open for business, approving more than $10 billion worth of projects in the past year alone. That includes a new $3.1 billion facility at Marsden Park in Sydney's northwest, the largest in the southern hemisphere.Sam Hawley: You may have driven actually past one of these data centres because there are quite a few now in Australia, mainly in Sydney and Melbourne. They're kind of like just massive big warehouses. They don't have windows and there's a lot going on inside which requires heaps of power and heaps of water.News report: Currently, data centres use about 2% of the electricity in Australia's main grid. That's the equivalent to 700,000 homes.Saul Eslake: Well, that's right. In fact, they are often also surrounded by higher fences and barbed wire, which might make you think that there's a jail or a detention centre behind that barbed wire. But yes, it would seem that data centres are proliferating like mushrooms across much of Australia.Sam Hawley: Yeah, and there is growing concern in relation to that, concern about the impact these centres might have on the local environment. Now Rochelle Flood, she's the Deputy Mayor of Lane Cove in Sydney, she is actually really worried about these data centres that are popping up in her area. They already have one there, but they have five more in the pipeline.Rochelle Flood, Deputy Mayor of Lane Cove Council: This site is very close, sort of within 100 metres or 120 metres of the local primary school. It's very close to local homes. People are quite worried about the air quality impacts. There's also a big strain on the local energy grid for Lane Cove. And then there's the broader issues around sustainability and water use, of course.Sam Hawley: It's a growing industry.Saul Eslake: Well, it is growing very rapidly and not a lot is known about it and not a lot is disclosed about what is done by whom and for whom at these centres. So in much the same way as we've seen a pushback in rural communities against renewable energy generation, wind farms and the like, and in particular against transmission infrastructure, that is poles and wires marching across farmlands, we're seeing something similar in urban areas with regard to data centres.Sam Hawley: Yeah, because Australia, it is becoming one of the leading countries in the world to actually house these data centres, isn't it? Why is that?Saul Eslake: Well, I think that's because we have a lot of space and because we have a reasonably tech savvy population and because we're perceived as having or likely to have ample resources of renewable energy if we make the transition to net zero according to the commitments that the government has made under the Paris Accords and the like. And so from that point of view, it seems that Australia is an attractive destination. I've seen figures suggesting that we are currently ranked about fourth in terms of the amount that's being spent on the construction and operation of data centres, obviously well behind the US and a couple of other places. But nonetheless, and despite the fact that we're a long way away from major population centres in the world, we do seem to be attracting a lot of this investment.Sam Hawley: All right, so then, so let's now consider the economics of all of this here, because the AI boom, it is massive. The money involved is exceptional. You know, this is actually being compared to the mining boom in the 2010s, isn't it?Saul Eslake: Well, it is being compared with that, although it's still a long way short of the numbers involved in the mining investment boom. The best information we can get on it comes from the Stats Bureau's Capital Expenditure Survey. Data centres fall within a category that's called information, media and telecommunications services. So that includes, among others, the big phone operators, Telstra, Optus and Vodafone. It includes media proprietors, but it does include these data centres as well. And the ABS figures tell us that of the financial year 2025-26, capital expenditures was $18.2 billion. It's doubled over the past year or trebled over the past three or four years. It represents now just under 1% of GDP. By contrast, the mining investment boom, when it peaked in 2012-13, was worth 6.5% of GDP. So it's a long way short, at this stage at least, of the size of the mining investment boom. But it's probably the biggest investment boom that we have seen or are likely to see over the next couple of years since that time.Sam Hawley: Alright, so it's not as big as the mining boom that we had here yet. But this data boom, if we can call it that, it does have people like the independent senator David Pocock sitting up and taking notice. Now, he thinks we should be taxing these data centre owners just a bit more so we get a bit back.David Pocock: I think we need to be distinguishing between Australian-owned sovereign data centres. And there's actually some really good operators who I think do it well. They have social licence. They're not using water. They're doing things well. I have real concern of this hundreds of billions of dollars of potential investment from what people call the hyperscalers, the big multinationals who look at Australia and let's be honest, just see dollar signs.Saul Eslake: When it comes to tech companies, they don't pay very much tax at all in the 2023-24 year. The six biggest tech companies only paid $572 million in tax. And part of the reason is that they use devices to transfer a lot of what would otherwise be profits to low-tax jurisdictions offshore. I think it would perhaps be worth considering imposing some kind of sales tax or excise or a differential rate of GST on the big tech companies, especially if their activities are going to rise very significantly in Australia as these data centres get built out.Sam Hawley: OK. And David Pocock, he wants to make sure that these multinational data centres are paying an appropriate amount of tax.David Pocock: And until the government is actually willing to step up and say, hang on, we have something here in Australia that you really want. And if you are going to come and do business here, you have to, one, actually pay tax here in Australia and two, have some very firm guarantees around things like energy usage, water usage, that Australians are not going to have to pay the price of hosting this infrastructure.Saul Eslake: I think Australians and our political representatives ought to be thinking about ways of ensuring that these companies who are going to be using up large quantities of potentially valuable land that are close to Australia's cities that might otherwise, for example, be used for housing and potentially using a lot of electricity and maybe making large revenues, that the Australian people get an appropriate dividend from the use of all those resources by those companies paying an appropriate amount of tax. Data centres are not digging anything up. They're not exploiting resources that are owned by the Australian people. They certainly shouldn't be getting concessional prices for the electricity they use. They should be paying rates and other taxes on the land which they own. And as I say, governments need to be very alert to the fact that many of these companies have a track record of using artifices to transfer profits that would otherwise be taxable in Australia to low tax jurisdictions offshore.Sam Hawley: Well, the CEO of Data Centres Australia, so that's the peak body, of course, for the sector, Belinda Dennett, she says these centres, having them here in Australia, built here, it's really important for our AI capability that there are many benefits that come with this.Belinda Dennett, Data Centres Australia CEO: We're creating a huge number of construction jobs, electricians, air conditioning, technicians, operational staff, and that's just in the building of the data centres. As we build out that infrastructure and we start. Thinking about exporting AI creating AI creating tokens, creating intelligence here and exporting that. We see a much larger pull through of the value chain and the ecosystem that we can create here in Australia.Saul Eslake: Of course, there are benefits from Australia having a stake in what's obviously going to be one of the world's fastest growing and potentially profitable industries and one that's going to make major changes to the way people in Australia and in other parts of the world live and work, some good, some potentially not so good. And, for example, there's always a risk with some of these things that in the event of disruptions to international communications channels, Australia could find itself unable to use artificial intelligence if we were completely reliant on data centres located in other countries that might be a long way away from us. So, you know, there are some economic and some security, I guess, arguments for wanting to have some of these things located in Australia. The issue here is on what terms and for whose benefit.Sam Hawley: Yeah, and are there any predictions on how much this sector could be worth in the decades to come? I mean, this is an incredibly fast growing sector, isn't it?Saul Eslake: Well, it is, and as is often the case with things that emerge and grow very rapidly, as we saw, for example, in the second half of the 1990s, there can be a lot of hype and euphoria about developments here and history of major technological innovations going back to the beginning of the Industrial Revolution tells us that some of the promises that are made and some of the forecasts that are given turn out not to be reliable or accurate. And, of course, there's similar euphoria in the stock market. And if there were to be some kind of correction in the share prices, the so-called hyper scalers that are building the data centres, well, again, they probably wouldn't be able to finance all of the physical investment that's currently being talked up. So, you know, there are some significant risks associated with this that we also need to be conscious of.Sam Hawley: All right, well, so these data centres, they are becoming more controversial around the world as more and more are built, including here, of course, in Australia. But what do you reckon? Is this a train that we're really on and we can't get off? Is it better that we just accept that this is the way of the future and this is what's going to happen and it might be actually quite good for our country? Or should we be pretty sceptical at this point in the process?Saul Eslake: Well, I don't doubt that AI is one of the most far-reaching and revolutionary technological developments that we have seen in the past century. And as I said before, it's going to profoundly alter the way we live and work, sometimes for the better and potentially, in some cases, particularly as regards employment, potentially for the worse. And given how important it's likely to be across the globe, it makes sense that we have a stake in it as a nation. And if, as many people argue, we've got comparative advantages in the supply of renewable energy at scale, then that's something that it would make sense for Australia to take advantage of and to exploit. But what return are the Australian people going to get from hosting these centres? Is it going simply to generate lots of profits for foreign-owned companies that manage not to pay very much tax on those in earnings that are generated in Australia? Those are things that Australian people ought to be asking questions about and governments ought to be providing some answers.Sam Hawley: Saul Eslake is an independent economist. This episode was produced by Sydney Pead and Anna John. Audio production by Sam Dunn. Our supervising producer is David Coady. I'm Sam Hawley. Thanks for listening.