Prepare to dive into a fascinating economic tale! While Donald Trump's approval rating hits rock bottom, the US economy is thriving, outperforming Australia by a significant margin.
The US Bureau of Economic Analysis reveals an impressive 4.4% annual GDP growth in Q3 2025, a stark contrast to Australia's 2.1%. This robust expansion is driven by robust consumer spending and a rebound in exports.
But here's where it gets controversial: the US also boasts a lower inflation rate of 2.4%, while Australia grapples with a higher rate of 3.8%. This has led to a 'long fight' to control inflation, with mortgage holders facing potential rate hikes.
Australia's Consumer Price Index rose 3.8% over the year to December 2025, exceeding the Reserve Bank of Australia's target range. In response, the RBA hiked the cash rate to 3.85%, a move that sets Australia apart from its peers.
The US, along with other Western nations, is still easing interest rates, with the Federal Reserve expected to make further cuts. This is a stark contrast to Australia's situation, where mortgage holders face an uncertain future with potential rate increases.
And this is the part most people miss: the US economy's productivity is a key factor in its success. US labor productivity grew 1.9% in the year to Q3 2025, significantly outpacing Australia's 0.8% increase.
Experts attribute Australia's stagnant productivity to various factors, including a boom in non-market sector jobs. Leith van Onselen, Chief Economist at Macrobusiness, highlights the role of AI in the US's productivity growth, stating, "Australia is lagging because of poor productivity growth, while the US is experiencing a strong AI-driven revolution."
Without improved productivity, Australia's economy will continue to face capacity constraints, impacting GDP growth and increasing inflation. America, on the other hand, has been able to grow strongly without triggering inflation due to its higher productivity.
The US unemployment rate stands at 4.3%, slightly higher than Australia's 4.1%. However, experts argue that Australia's lower rate masks a structural issue, with recent job growth largely funded by the government in the non-market sector.
Shane Oliver, AMP Chief Economist, agrees that the key difference lies in productivity. He states, "Australia's poor productivity growth limits our ability to grow wages and living standards without causing higher inflation."
The US's higher productivity is attributed to its greater exposure to AI and related investments, as well as a more dynamic and less regulated economy. Former RBA economist Martin Eftimoski warns, "We've dropped the ball on productivity, and it's why the RBA has to intervene. Our productivity is like our speed limit - slower than the US, so we can't grow as fast."
While the US economy has its strengths, Eftimoski cautions against adopting all its aspects, highlighting issues like growing wealth disparity and federal debt.
Despite the economic success, Trump's approval rating has hit a new low, with just 36% approval in a recent poll. Many voters are unhappy with immigration raids, despite conservative commentators praising his economic record.
"Year one of Trump has been incredible... It's honestly extraordinary," wrote Clay Travis on X. But the midterm elections in November could be a different story, as voter sentiment towards Trump may impact the chances of Republican candidates closely tied to him.
So, what do you think? Is the US's economic success solely due to its productivity, or are there other factors at play? And how will Trump's low approval rating impact the midterms? Let's discuss in the comments!
