RBA warns local AI data centre construction is driving inflation pressures

Reserve Bank of Australia Deputy Governor Andrew Hauser warned on Wednesday that the artificial intelligence infrastructure boom is putting fresh pressure on domestic inflation. Speaking at the Citi Australia and New Zealand Investment Conference in Sydney, Hauser noted that data centre building and rising technology costs are contributing to broader economic strain.

While central bank officials previously treated AI mainly as a future productivity booster, Hauser pointed to the immediate financial footprint of the sector. Large volumes of money flowing into onshore facilities require heavy physical construction, specialized tech equipment and scarce energy resources. Because these investments absorb capital and labour right away, they create capacity bottlenecks before delivering any output gains.

Hauser explained that business feedback to the central bank showed companies are facing higher technology and input prices, with many choosing to pass those increases directly to their customers. According to Hauser, a growing proportion of firms now treat inflation running between 3 and 3.5 per cent as normal business conditions, complicating the Reserve Bank's effort to return consumer price growth to its 2 to 3 per cent target band.

Financial markets responded to the remarks by lifting the expected odds of another official cash rate increase at the central bank's board meeting on 3 November. Market projections for an interest rate rise jumped from under 27 per cent up to roughly 40 to 50 per cent following the Sydney address.

What this means for Australian businesses

Small and medium enterprise owners need to plan for higher costs across both their technology setups and their general financing:

• Technology budgets face direct price hikes. Enterprise software subscriptions, cloud hosting packages and specialized AI tools continue to climb in price as providers pass on data centre building and hardware expenses. Business owners should review recurring software licences quarterly to cancel unused seats and avoid paying for dormant features.
• Borrowing costs will stay higher for longer. With the central bank watching AI-driven construction pressure, relief on business loan and mortgage rates remains further away. Owners carrying variable-rate commercial loans should stress-test their cash flow against another rate rise this year.
• Productivity gains must be measured rather than assumed. Because infrastructure bottlenecks mean technology costs are real today while economy-wide savings remain speculative, firms should only adopt AI automation projects with a clear, near-term payback on labour hours or customer turnaround.