Albanese plans a ban on suburban data centres

At a glance

• The Albanese government plans to ban new data centres from suburban Australia in draft AI laws due for public consultation by the end of 2026, the Australian Financial Review reported on 29 October 2026.

• New proposals in inner-suburb business parks would be the first test of the ban: Lane Cove West, Artarmon and Mascot in Sydney, and West Footscray, Spotswood and Clayton in Melbourne.

• Industrial estates at Eastern Creek, Erskine Park and Truganina, and regional campuses at Wagga Wagga, near Dalby and in the Hunter, are further from housing.

• Prime Minister Anthony Albanese said in July the standards would be "for new proposals", and Victoria's new rules exclude applications under assessment.

• Canberra's September consultation paper proposed leaving data centres under 30MW out of the standards, and asked what distance from homes should apply.

The Albanese government plans to stop new data centres being built in Australia's suburbs. The ban would sit in draft AI laws to be released for public consultation by the end of 2026, the Australian Financial Review reported on 29 October 2026, citing people familiar with the policy. The same draft is reported to carry copyright rules for AI training and a renewable energy requirement for data centres, with power cuts for facilities that fail it. The draft has not been published.

The ban would put into law a position Prime Minister Anthony Albanese took in August. Ahead of a speech to the Business Council of Australia on 25 August 2026, his government set out national rules to keep new data centres away from homes, schools and prime agricultural land. In the speech he said data centre locations must be "appropriate". National Cabinet agreed on 26 August 2026 that the Commonwealth would develop mandatory standards for data centre energy, water and land use, to be legislated in early 2027.

Three suburban projects stalled in September and October

The proposal lands after suburban opposition stopped or delayed three projects in Sydney and Melbourne. Goodman withdrew its 90MW Project Mars at Lane Cove West in September after residents and Lane Cove Council opposed it. Monash council refused Centuria's 38MW data centre at Clayton on 29 September, against a recommendation from its own planning officers. In Melbourne's inner west, Jemena suspended parts of the 66kV line works that feed NEXTDC's M3 campus at West Footscray, and NEXTDC removed about A$140 million each of net revenue and underlying EBITDA from its FY27 guidance, according to its ASX release of 21 October.

Project Mars and the Clayton building were both on commercial land: a warehouse estate in the Lane Cove West Business Park and a Telstra-occupied data centre campus owned by Centuria. Project Mars was about 20 metres from the nearest house and the Clayton building about 80 metres from homes across the Princes Highway. M3 is approved and partly operating, and its hold-up is in pole replacements for the 66kV line through parts of Yarraville and West Footscray. Jemena cited community and stakeholder opposition and the local council withholding consent as road authority, and does not expect to restart the works before February 2027.

Source: NSW Planning Portal; ABC, 28 September 2026; Monash City Council officers' report as reported by W.Media, 5 October 2026; NEXTDC ASX release and AAP, 21 October 2026.

Canberra has not yet set a distance from homes

Because both sites were on commercial land, how far the ban reaches depends on how the draft defines suburban. The Department of the Prime Minister and Cabinet's consultation paper of 17 September 2026 proposed that large data centres be located away from sensitive community areas "where impacts cannot be appropriately avoided or managed". It asked whether a minimum distance from schools and homes should apply, what it should be, and which level of government should run it. It also proposed that facilities below 30MW sit outside the standards, with baseline requirements from 30MW to 100MW. Submissions closed on 9 October.

Victoria said on 22 September 2026 that data centres will be prohibited in residential zones and must sit 150 metres from homes. A ban on residential zoning alone would not reach a business park or a data centre campus. Both sites were closer to homes than 150 metres. ACT Chief Minister Andrew Barr has said data centres cannot be built in Canberra's residential neighbourhoods, under a framework due in early 2027, as listed in Australian data centre policy by state.

Where a suburban ban would apply in Sydney and Melbourne

Whatever distance the draft sets, a suburban ban would fall first on the next data centre proposed where industrial or business land backs onto houses. Albanese said on 16 July 2026 that the standards "will be for new proposals", and Victoria's rules will not apply to applications under assessment, as set out in the 2027 rules and the pipeline.

Applications in the system. NEXTDC lodged M3 Stages 6 and 7 in February 2026 and expects the Victorian Government's decision after the state election on 28 November 2026. GreenSquareDC's Spotswood campus and Centuria's second Clayton building are also under assessment. Councils can still refuse such projects on existing planning schemes, as Monash did at Clayton.

The business parks where the next proposals would land sit beside housing.

Sydney's inner north and south. AirTrunk operates its SYD2 campus in the Lane Cove West Business Park, where a separate Lane Cove DC Alliance proposal was reported withdrawn on 20 October. Goodman is building at Artarmon, on the site of the former ABC studios, and has approval for Project Duke at Mascot.

Melbourne's inner west. Beyond M3, GreenSquareDC has applied to build a 240MW data centre at Spotswood on a former petroleum depot site in Simcock Avenue, where residents have raised concerns. Hobsons Bay council asked its officers on 28 July to assess data centres near homes.

Melbourne's south-east. Centuria has a second application for up to 40MW on its Clayton site.

Growth-area fringes. A proposal at 585 Berwick-Cranbourne Road, Clyde North, sits on land zoned for future urban growth and drew 13 objections by 24 July, as set out in Melbourne's new data centre campuses.

Sites away from homes. STACK's 450MW Erskine Park proposal sits in the Fitzpatrick Industrial Estate, Goodman's Project Atlas is proposed on a former Coles distribution centre site at Eastern Creek, and STACK operates at Truganina in Melbourne's outer west, where Goodman has lodged plans for three buildings. Gigawatt-scale proposals are regional, including CDC's 1.4GW campus at Wagga Wagga and Zerra DC's Western Downs Digital Park near Dalby, where Anthropic signed a lease in September 2026. AirTrunk has proposed a 550.5MW campus on the former Hydro Aluminium smelter site near Kurri Kurri in the Hunter.

Bowen's rule change request sets out how supply could be cut

The AFR report also describes power cuts for data centres that miss the renewable requirement. A separate request from Climate Change and Energy Minister Chris Bowen to the Australian Energy Market Commission, which writes the national electricity rules, was posted on 28 October. Qualifying data centres would need firming arrangements matching the scale and profile of their demand. Financial penalties would be the main enforcement tool, and a data centre that still fell short could be required to reduce its demand until it showed enough cover, RenewEconomy reported.

What to watch

The draft law. Due for consultation by the end of 2026, the AFR reported. It will show whether "suburban" means a residential zone, a distance from homes and schools, or both, and whether the 30MW threshold holds.

The parliamentary inquiries. The NSW Legislative Council inquiry into data centres reports by 3 November 2026, and the Senate inquiry into AI and data centres by 16 November.

NEXTDC's AGM. NEXTDC will announce the outcome of its capital expenditure review by its annual general meeting on 20 November 2026, and update the market on M3.

Legislation. The Commonwealth intends to legislate the national standards in early 2027.