On Mamre Road in outer western suburbs of Sydney, there are plans to build a "hyperscale" data center that would become one of the world's largest data centers.

If approved, the 52-hectare site would include six buildings standing 40 meters high with four stories, along with 936 cooling units and 852 diesel backup generators.

The Mamre Road project is part of an estimated $155 billion investment pipeline over the next decade, as the world scrambles to build infrastructure supporting the artificial intelligence revolution.

According to data from the Climate Commission, the country currently has approximately 160 data centers in operation, with another 90 proposed for construction.

Australia is in the midst of a sudden and massive data center boom, but not everyone believes it is beneficial for the country.

Alex Hooper, Head of Climate and Energy Economics at Oxford Economics Australia, says the global appetite for data center investment is so enormous that "theoretically we could have a data center industry of any scale."

"The opportunities are enormous, but we need to act intelligently. Data center investment does bring a certain level of benefits to Australia. The question is: how much do we actually need?" Hooper says.

"Once we have that level of investment here, the next question we need to ask is what role data centers can play in our economic growth and prosperity. The productivity argument exists, but it is not settled."

These questions are now concerning experts, policymakers, and governments at all levels.

The most direct questions concern how much electricity and water Australia can supply in an affordable and sustainable manner, and what returns the country will receive.

Data centers are a critical component of the digital economy. They are essentially large, climate-controlled warehouses filled with racks of servers and other IT equipment used to store and process the vast amounts of data needed to keep websites, cloud services, and artificial intelligence running smoothly.

Hooper calculates that data centers now account for 2.8% of electricity consumption on Australia's east coast.

"By 2030, we expect this to reach 7%, rising to over 10% by the mid-2030s. Given the strength of the project pipeline, there is also significant upside risk to this outlook," she says.

Once operational, the Mamre Road data center would become the country's single largest energy consumer, consuming more electricity than the Tomago aluminium smelter.

This is an important reason why Penrith Council has expressed its unwillingness for the project to proceed.

The Climate Commission estimates that if potential additional data center demand is not offset by additional renewable energy, wholesale electricity prices on the east coast could be 20% higher by 2035.

Data centers also consume substantial amounts of water for evaporative cooling to prevent servers from overheating, and require large tracts of land—mostly located within cities and sometimes near residential areas.

Moreover, despite consuming so much, they do not create many jobs.

Research in the United States shows that typically thousands of workers are needed during the construction phase, but only hundreds are required during operations.

This raises a question: why should we build them?

Beth Webb, Economics Professor at the University of Melbourne and advanced manufacturing expert, is optimistic that Australia can avoid the pitfalls that data centers have caused overseas.

"The United States has already exposed all the problems," Webb says, including not requiring developers to provide additional energy and water for centers, and placing them too close to residential areas.

"I think this will be a win. Foreign direct investment is a very important source of knowledge exchange, and as long as there are appropriate rules in place, I don't see many downsides."

Pat Bustamente, Senior Economist at Westpac, says there is "absolutely no doubt" that the data center boom is beneficial for the economy.

"This lays the foundation for the next wave of productivity growth. We saw this during the PC and IT revolution in the late 1990s, and this will be bigger than that," Bustamente says.

"It is in the production and use stage of data centers that you get productivity gains, and these will follow. Once this high-speed computing capacity is in place, we should expect to see productivity improvements."

To a large extent, doubts about whether data centers will become a blessing or a burden for Australia are rooted in deeper and broader community anxiety surrounding artificial intelligence.

As ANZ Chief Economist Sally Auld says: "People and society have major questions about where artificial intelligence will take us.

"So are we just sowing the seeds of our own destruction?"

Auld does not think so. Her research suggests that new technology will enhance rather than replace most jobs.

"But it's hard to know what the ultimate impact will be."

Hooper says that policymakers need to develop appropriate overall industrial policy to ensure that data centers are something that benefits us, rather than just something that happens to occur to us.

"We have much at stake in ensuring the public sees the benefits, and for that we need to have a vision for the future," she says.

"I think the opportunities are enormous, but we must act intelligently."