Data centres are driving industry growth in Australia

Australian gross value added (GVA) growth slowed in the March quarter, with GVA rising 0.3% q/q and 2.5% y/y and output rising in 14 of 19 industries. The near-term picture has softened, with the Middle East conflict, above-target inflation, and successive rate hikes weighing on growth; indeed, we now expect growth to ease to around 1.8% over 2026, down from a pre-conflict 2.4%. Resilient business investment, led by data centres, and a June-quarter mining rebound are the main supporters of industry growth this year.

• Cyclone Koji was the quarter’s biggest swing factor. The storm shut in thermal and coking coal across Queensland and New South Wales and hampered the freight sector, pulling mining down 1.5% q/q, the single largest drag on growth, and taking transport down 1.3% q/q as port volumes fell. Little of that output was lost, though, with cargoes backed up onshore waiting to ship, so the June quarter should bring a sharp rebound as the delayed volumes clear.

• Data centres are reshaping the investment landscape across multiple industries. Non-residential building activity will continue to surge in 2026, with major facilities ramping up across Sydney and Melbourne. In time, this translates into higher demand for utilities as data centres account for a growing share of electricity consumption, and professional services firms will benefit from the engineering design and IT project work generated by the pipeline. Combined with a wave of hospital construction, business investment should remain sturdy, despite the weaker macro environment.

• The Strait of Hormuz has reopened, but the Middle East conflict will leave a lasting impact across several industries. The earlier spike in energy, fuel, and fertiliser costs is still feeding through to inflation and squeezing margins for manufacturers and diesel-reliant farmers, and with Australia importing more than 90% of its fuel, the economy remains exposed to any fresh flare-up. Mining export revenue has benefited from elevated commodity prices, but capacity-constrained LNG plants mean that shows up in earnings rather than output. The hit to confidence, prices, and profitability will ripple through the economy well after the shipping lanes have cleared.

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