Democrats' US midterm win carries the same warnings for Australia, analysts say

The Democrats' big victory in the US midterm elections has flipped control of Congress, and its ripples have reached Australia. Observers say the result should broaden Australia's alliance with the US, even as a new power base emerges in Washington, affecting Aukus, datacentre development and relations with China.

Cabinet ministers, diplomats and Australia's defence industrial sector closely watched this week's results. With control of Congress passing to the Democrats, the outlook for President Donald Trump's final two years in office is seen as badly dented.

According to analysts, public fury over the cost of living, particularly fuel prices, and the impact of datacentres were two factors that played a major role in the midterm results, and both carry warnings for the Australian government.

Bruce Wolpe, a senior fellow at the United States Studies Centre, said Trump's ability to rile up voters had been undermined by cost-of-living pressure. He said Prime Minister Anthony Albanese's government was also taking a hit from the economic fallout of the Iran war.

Wolpe said, 'I think a lot of people are wondering what does this [Australian] government do? Have they lost control of the economy?' He said that in January, before the Iran war, the outlook looked pretty good, but after the budget process and the war people were very uncertain where it would end. 'It is not an immediately solvable problem, and people really dislike it,' he said.

Westpac's head of international economics, Elliot Clarke, said the landslide midterm results had 'dramatically changed' the outlook for the Iran war, which could affect Australia's economy. 'It has changed the atmospherics around the Middle East conflict,' he said. 'It's positive news.'

As the election results filtered out, the global oil price dropped steeply. The Brent crude benchmark, which had threatened to pass its April peak, has instead plunged by 20%. Clarke said more confidence in a potential resolution in the Middle East would also help curb inflation and help central banks hold back on rate hikes.

Coalition frontbencher Andrew Hastie said the results showed economic messaging was critical. 'People feel worse off after tariffs and after the war in Iran, and Donald Trump has said a few times now that he doesn't really care,' he told 2GB.

Arthur Sinodinos, a former ambassador to Washington, said the change on Capitol Hill was a chance for Australian officials to progress policy goals with both US parties, and to consider the relationship beyond the 2028 presidential election. He said Congress may put more pressure on the administration to support Ukraine and pass measures funding munitions for Ukraine. He also thought the Chinese would feel more emboldened, but that it would not translate into sudden action on Taiwan.

Trump claimed Republicans had fared poorly because he was not on the ballot, despite repeatedly urging voters to pretend he was on the ballot. Vice-President JD Vance called Trump's war in Iran 'the obvious culprit'.

Former industry minister Ed Husic wants a radical shake-up of the alliance. 'The moment to reset the relationship with the Trump administration is right now,' he said. 'A completely different Congress will require that administration to do things differently, including not hurting allies - friends, such as Australia - with tariffs.'

Abe Denmark, a partner at The Asia Group and an architect of the Aukus agreement in the Biden administration, warned against over-interpreting the results for Australia. What will change, he said, is how power is distributed in Washington: Democratic chairs controlling authorisations and appropriations, Republicans more willing to break ranks, and 2028 hopefuls from both parties looking to stand out. Denmark said the Democrats could take a different view from Trump on Aukus spending, as the US submarine industrial base needs a dramatic step up in production.

Vermont senator Bernie Sanders has already called for a moratorium on new datacentre construction. Greens senator Sarah Hanson-Young said it was no coincidence that datacentre hotspots like Texas, Georgia and Ohio had shifted to support Democrats. Acting prime minister Richard Marles said cost-of-living and datacentre anxiety was at play in both countries, and that the social licence for where datacentres are built had to be right - they should not be built in suburbs, and the right power and water must be brought to them.