The Federal Government has launched an investigation into the risks, opportunities and legalities of cloud computing for public sector agencies.
Research was underway at the Department of Finance's Australian Government Information Management Office (AGIMO) into what it considered an "emerging technology".
A spokesman for the department said it had consulted with other government agencies, and planned to consult with the industry also prior to completing the investigation.
The investigation began in mid-2010 and was expected to conclude early next year, he said.
"We are considering the risks, opportunities and issues relating to the possible government use of cloud computing," the spokesman told iTnews.
"Cloud computing provides opportunities but comes with challenges that need to be examined and addressed.
"In particular, issues of security and privacy are critical to government and need to be understood and addressed in the context of its use of cloud technologies."
Minister for Privacy and Freedom of Information Brendan O'Connor said governments, like businesses, could benefit from adopting cloud computing technologies.
These benefits included the better use of IT assets, and cheaper costs due to lower capital investment, he told the International Association of Privacy Professionals (iappANZ).
Connor said AGIMO would research the security, privacy and legal compliance implications of offshore data storage, and the contractual arrangements necessary to achieve appropriate levels of security.
Data portability was a concern, as was agencies' ability to retrieve information in the event of a disaster or vendor failure.
The Privacy Minister noted that cloud providers could be more attractive to cybercriminals due to their concentration of resources and data.
Highlighting last December's cyber attacks on Google, O'Connor warned it was often too late by the time victims realised their data and corporate secrets were stolen.
But there was a "compelling case" for businesses to use cloud services, especially with the National Broadband Network expected to deliver fifty times today's internet network speeds, he said.
He called for increased transparency and confidence between cloud service providers, businesses and government agencies.
"Given the benefits of cloud computing, not just to business, but also to government and to individuals, there is an imperative for us to work through the issues together, in order to take full advantage of everything that cloud computing has to offer," he said.