The recent elections in the United States and New Zealand have been driven by the same economic forces: soaring inflation and cost-of-living pressures. In the U.S., the Trump administration faced a massive swing against it in the midterms, while New Zealand's political fate remains uncertain after several high-ranking ministers lost their positions. Both outcomes reflect voters' frustration with governments struggling to contain inflation, which has been exacerbated by Donald Trump's decision to bomb Iran.
The global economic landscape is marked by staggering debt levels, with global government debt hitting $US112 trillion last year. The U.S. alone accounts for about 38% of this debt, which has ballooned to 126% of GDP due to war and tax cuts. Meanwhile, Australia's government debt sits at 33%, though it is expanding due to ongoing budget deficits. The cost-of-living crisis has eroded workers' living standards, particularly in New Zealand, where wage growth has lagged behind inflation.
New Zealand's economy has been in and out of recession since the pandemic, with the Reserve Bank of New Zealand's aggressive interest rate hikes contributing to the country's economic woes. The official cash rate is now at 2.75%, but inflation remains high at 3.7%. Many Kiwis are migrating to Australia in search of better economic opportunities, with about 120,000 heading across the Tasman in the three years to mid-2026. This migration trend is putting pressure on Australia's rising unemployment rate.
Wall Street has also been volatile, with concerns about a shake-out in AI stocks following the Democrats' midterm election victory. Tech stocks shed about 6% on Thursday night, reflecting fears of regulatory controls over data centre construction. Australian superannuation funds, which have significant investments in Wall Street, particularly in technology stocks, are directly impacted by these market fluctuations. The economic uncertainty and growing unrest among voters highlight the challenges facing governments and central banks in addressing inflation and inequality.