The “formal investigation” would consider whether Facebook had breached the Privacy Act, which requires companies to take reasonable steps to keep their users' data secure, Acting Information Commissioner Angelene Falk said.
“Given the global nature of this matter, the [Commissioner’s office] will confer with regulatory authorities internationally,” Ms Falk wrote in a statement to media.
The investigation was launched on the same day roughly one in 80 Australians may have had their Facebook profile information “improperly” shared with Cambridge Analytica.
The Greens have called on the government to take steps to ensure any illegally-obtained information is not passed on without consent.
Digital Rights spokesperson, Senator Jordon Steele-John, told SBS News Labor and the Coalition need to push Facebook for the full picture.
"They must make sure that they use every power at their disposal to see that Facebook as a corporation informs its Australian users exactly what information has been gathered and shared, when this occurred, and to what purposes it has been used," he said.
"Australian citizens have a right to expect that their government will go in to bat for them in these issues."
Facebook today outlined a raft of new protections. They include launching an audit of third party apps that've had access to Facebook's information, restricting access to the site for third party apps, and deleting phone and text logs after a year.
Dr Fiona Martin, a Convergent and Online Media researcher at The University of Sydney, told SBS News she was "not surprised that Facebook is actually backtracking and trying to appear more transparent".
"Because it is a huge breach of trust to have had a data breach of this size. It can deter people from using both the platform, and any of the third party apps that are on it. So I really welcome more revelations from Facebook."
Facebook now believes as many as 87 million people had their profile information shared with the British consultancy firm linked to Donald Trump's presidential campaign, up from the previous estimate of 50 million people.
An overwhelming 81.6 per cent of the compromised accounts were based in the US, where Cambridge Analytica was working to influence the presidential election in Trump's favour.
Facebook estimated 311,127 Australian users had their data shared, representing 0.4 per cent of affected accounts and ranking Australia as the tenth-most-affected country.
The Philippines, Indonesia and the United Kingdom had the highest numbers after the United States.
Facebook's update on Cambridge Analytica Source: Facebook
Facebook said it would send profiles that had data shared a message explaining what had happened.
Affected users likely had a Facebook friend who used their Facebook login to access a psychological quiz app called ‘This Is Your Digital Life’. The message explains Facebook has since banned the app from its platform.
A disclaimer on Facebook’s data says the company does “not know precisely what data the app shared with Cambridge Analytica”.
Related reading
The Cambridge Analytica Facebook data breach explained
Zuckerberg accepts company 'messed up'
Facebook CEO Mark Zuckerberg told reporters on a conference call he accepted responsibility for the failure to protect user data, but maintained he was still the best person to lead the social network.
"I think life is about learning from the mistakes and figuring out how to move forward," he said in response to a question on his ability to lead the company.
"When you're building something like Facebook which is unprecedented in the world, there are things that you're going to mess up... What I think people should hold us accountable for is if we are learning from our mistakes."
Mr Zuckerberg said 87 million was a high estimate of the number of people affected by the breach, based on the maximum number of connections to users who downloaded the quiz.
"I'm quite confident it will not be more than 87 million, it could well be less," he said.
To remedy the problem, Zuckerberg said Facebook must "rethink our relationship with people across everything we do" and that it will take a number of years to regain user trust.
Mr Zuckerberg will soon front a United States House of Representatives committee for questioning over the company's privacy standards, with a hearing slated for April 11.
Facebook said it was also rolling out a new, "clearer" terms of service document to give users a better understanding of how their data was being shared.
- with AFP
