Why boards must plan for housing, energy & data storage in 2026

Housing affordability, the energy grid and data storage are three metrics in need of some heavy lifting, says AICD Chief Economist Mark Thirlwell GAICD.

Of the many themes set to characterise the year ahead, one worth watching is our progress on “building stuff”. Three important examples include addressing Australia’s long-running housing affordability challenge by boosting the number of homes; the substantial implications for energy capacity needs implied by the government’s new emissions reduction targets for 2035; and the accelerating build-out process for the infrastructure of our new digital age.

Housing hassles

According to a November 2025 assessment from Cotality, Australia’s housing affordability fell to record lows on three measures last year. The median dwelling value rose to 8.2 times median pre-tax household income; the time for the median household to save a 20 per cent deposit increased to 11 years; and the share of median household income required to pay the median rent rose to 33.4 per cent. A fourth metric — the cost of servicing a new loan — fell slightly to 45 per cent of income, due to RBA rate cuts last year, but remained far above the 20-year average of 34.1 per cent.

A critical part of the solution to this affordability problem is more supply. Since the start of the century, Australia has failed to build enough housing to meet the combined demand impact of population growth plus other demographic and social shifts. This diagnosis sits at the heart of the government’s 2023 Housing Accord, which set a target to build 1.2 million new, well-located homes over a five-year period from July 2024 to June 2029.

Progress has been challenging. According to the National Housing Supply and Affordability Council (NHSAC) State of the Housing System 2025 report, the supply of new housing in 2024 fell to almost its lowest level in a decade, as Australia only managed to complete about 177,000 dwellings. Last year began even more poorly. Through H1 2025, dwelling completions ran at around 78,600, down from the 82,700 completions achieved in H1 2024.

NHSAC judges the 1.2 million target “highly unlikely to be met” and in its 2025 forecast, estimates gross new housing supply over the full accord period will amount to around 938,000 dwellings, a shortfall of some 262,000 relative to the target. In NHSAC’s 2024 forecasts, the predicted shortfall was 256,900, meaning the gap has widened. Moreover, even hitting that new, lower forecast requires boosting the average annual rate of completion from current levels to around 188,000. If the RBA does start to tighten monetary policy and lift rates this year, the task will likely become harder still.

Lacking energy

Turning to energy needs — and the future of the east coast National Electricity Market (NEM) in particular — another major building challenge looms. This reflects a range of issues, including the politically problematic affordability problem for households posed by high retail energy prices. There is also the potential threat to some of Australia’s remaining energy-intensive industries from high industrial energy prices. The ongoing retirement of an ageing coal fleet of power stations — where, according to the Australian Energy Market Operator (AEMO), about two thirds of the remaining owners have already announced their closure by 2035 — pose reliability risks. Finally, there is the need to meet new electricity demand, including a growing pressure from the rising investment in data centres.

To that already-lengthy list, add the government’s new 2035 emissions reduction target, which tasks Australia with reducing GHG emissions by 62–70 per cent from 2005 levels.

According to the 2035 targets advice provided by the Climate Change Authority, the transition to a renewables-based electricity system — as set out in AEMO’s Step Change scenario for the NEM — could meet about half the reductions required. That scenario entails a significant scaling up of renewable generation and storage capacity. All up, the Step Change scenario envisions boosting the current rate of investment in renewables to around six gigawatts (GW) of new capacity each year until the end of this decade, up from the current rate of three to four GW. In addition, it requires about 6000km of additional transmission infrastructure.

Data centre boom

A third construction story to track this year is Australia’s growing investment in data centres. Australian Bureau of Statistics (ABS) data from the 2025 September quarter showed a 41 per cent (seasonally adjusted) quarterly jump in investment volumes by Australia’s information media and telecommunications industry. According to the ABS, a 91.5 per cent surge in the sector’s capital expenditure on equipment and machinery powered that jump, which the ABS attributed to a large rise in spending on data centres.

On one count, as of late 2025, there were 283 data centres in Australia (including 97 in Sydney and 55 in Melbourne), putting Australia in seventh place in the global rankings, just behind Canada and France. According to another November 2025 estimate (Visual Capitalist), while data centre capacity in Australia has expanded by a factor of 40 over the past two decades, almost two-thirds of that growth has arrived in the previous five years. The pace has picked up again over the last 12 months, with Australia now projected to be in the global top three by the early 2030s.

The direct economic payoff from data centre investment is probably limited, given much of the investment relies on imported equipment and, following construction, any employment creation will likely be modest. Even so, ultimately it could deliver important economy-wide payoffs by providing the underpinning infrastructure for digitalisation and any accompanying productivity gains.

This article first appeared as 'Under construction' in the February/March 2026 Issue of Company Director Magazine.