In a submission to a Senate inquiry into AI data centres, the Australian Chamber of Commerce and Industry said a source neutral approach was needed to drive investment in the energy-hungry hubs.
"Australia needs a data centre plan, not a data centre panic," the submission said.
"Blanket restrictions, moratoriums or one-size-fits all rules would drive investment offshore without solving energy, water or planning constraints.
"The right response is a can-do attitude to put Australia in the front rank of tech-savvy countries."
The submission followed plans by Prime Minister Anthony Albanese for mandates for AI data centres to provide their own renewable energy as the use of the technology grows.
The proposal was met with resistance from Queensland and the Northern Territory, which argued for data centres in their jurisdictions to be powered by coal and gas.
A national cabinet meeting in August appeared to sign off on carve outs for Queensland and the NT to power their data centres without renewables, although Energy Minister Chris Bowen denied such measures were signed off.
The chamber's submission said approaches advocated by Queensland and the NT were the right way to lift investment.
"Inherent differences between states and territories' energy profiles must be recognised," it said.
"ACCI supports source-neutral energy decisions across the economy, in the understanding that a diverse energy mix ultimately provides better outcomes for price and reliability for businesses and consumers."
The business peak body said Australia was on the cusp of having world-class investment in the sector domestically if it had the right settings.
"Australia should welcome the significant investment, productivity gains, jobs and sovereign capability that data centres bring to the economy," the submission said.
In a Treasury brief handed to Treasurer Jim Chalmers, AI could provide productivity gains across the public and private sectors to the tune of 1.2 per cent a year by 2030.
Treasury also flagged the capacity of AI to disrupt high-skilled, non-routine and cognitive jobs in a way never seen in previous technological advances.
"This is probably the most transformational economic development of our lifetimes," Dr Chalmers told reporters in Canberra on Wednesday.
"I'm confident that we can maximise the economic upside and minimise the risks, but it will take work."
Council of Small Business Organisations Australia chief executive Skye Cappuccio said smaller companies could be left behind in the AI race.
"Small businesses cannot be expected to make that transition in the same way or at the same pace without an initial hand to adapt," she said.
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