Ruqayyah Snyder
The UK's departure from the European Union, or Brexit, has had a range of consequences for countries around the world, including Australia. As the UK is Australia's fourth-largest trading partner, to the tune of $10.4 billion, Brexit is likely to have a significant impact on Australia's economy and its relationship with both the UK and the EU. In this paragraph, we will explore the potential effects of Brexit on Australia and discuss whether it will have a positive or negative impact on the country.
| Characteristics | Values |
|---|---|
| Australian dollar | Could rise 8.3% against the British Pound |
| Could fall 2.5% against the US Dollar | |
| Australian share market | Likely to fall |
| UK-Australia trade deal | In progress, but not yet reached |
| Australian agricultural exporters | Can continue to export to the UK |
| UK health certificates | Required from 1 January 2021 |
| UK-EU trade deal | Unlikely to be achieved before the deadline |
| Impact on small businesses | Could be substantial, especially in case of a 'no-deal' Brexit |
| Australia-EU relationship | Likely to change |
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What You'll Learn
Australia's relationship with the EU
During the transitional period, nothing changed for Australian businesses, as the UK remained in the EU single market, and the current trade arrangements were maintained. However, after the transition period ended, there were concerns about potential disruptions to trade with the UK and the EU. For instance, some Australian businesses claimed that their meat exports were already suffering due to Brexit.
The Australian government has been actively negotiating with both the UK and the EU to amend the initially proposed 'splits' regarding export quotas. As a result, Australia reached an agreement with the EU and an in-principle agreement with the UK on amended splits, working to ensure a smooth transition for Australian exporters.
Brexit has also impacted Australia's agricultural exporters, who have had to adapt to new requirements for exporting their products to the UK. The UK has implemented new health certificates, rolled over EU-approved establishment listings, and made changes to import regulations for live animals, animal products, and plant imports.
Overall, while the full consequences of Brexit on Australia's relationship with the EU are yet to be seen, there have been immediate effects on trade and export arrangements, with ongoing negotiations between Australia, the UK, and the EU to minimise disruptions.
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Australian dollar value
The UK is Australia's fourth-largest trading partner, with a trade value of $10.4 billion. The UK's departure from the EU will likely impact Australia's relationship with the EU, which is Australia's second-largest trading partner.
During the Brexit transition period, the UK remained in the EU single market, and trade arrangements with Australia were unaffected. However, after the transition period, there may be changes to these arrangements, and Australian businesses may experience disruptions in trade. For example, some Australian businesses have claimed that meat exports have already suffered due to Brexit.
The impact of Brexit on the Australian dollar is uncertain and will depend on various factors, including the specific terms of the UK's withdrawal from the EU and the nature of any future trade agreements between the UK, EU, and Australia.
In the short term, the Australian dollar could rise against the British pound but may fall against the US dollar. According to the Commonwealth Bank's Global Market Research, the British pound could fall by up to 10%, while the Australian dollar could rise by 8.3% against the pound but fall by 2.5% against the US dollar.
In the longer term, the impact on the Australian dollar will depend on the extent to which Brexit affects Australia's trade relationships with the UK and EU. If Brexit results in increased trade between Australia and the UK, it could positively influence the Australian dollar. However, if Brexit disrupts Australia's trade with the EU or negatively affects the Australian economy, it could negatively impact the Australian dollar's value.
Overall, while there may be short-term volatility in currency markets due to Brexit, the long-term impact on the Australian dollar will depend on the evolving trade relationships and economic conditions arising from the UK's departure from the EU.
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Australian agricultural exporters
The UK is Australia's fourth-largest trading partner, with two-way trade valued at $10.4 billion. The UK's departure from the EU will likely impact Australia's relationship with the EU, leaving many Australians wondering about Brexit's effects on their country and economy.
Brexit's impact on Australian agricultural exporters is a key concern for the Australian government. The government has been working closely with the industry to ensure that Australian agricultural exporters can continue to trade with the UK. The UK is rolling over EU-approved establishment listings and countries approved to import live animals and animal products.
The UK and EU's initially proposed 'splits' of export quotas for beef, buffalo, sheep, and goat meat, cheese, sugar, and rice took effect on January 1, 2021. The Australian government reached an agreement with the EU and an in-principle agreement with the UK on amended splits. It is working with both sides to ensure the new arrangements are implemented smoothly.
The UK health certificates will be required from January 1, 2021, although the UK will accept EU model export health certificates until June 30, 2021. From January 1, 2021, a Great Britain Certificate of Inspection (CoI) will be required for entry into Great Britain.
While the UK's exit from the EU may impact Australian agricultural exporters, the Australian government is actively working to ensure a smooth transition and continued trade with the UK.
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Australian share market
The direct impact of Brexit on Australia is expected to be fairly limited, with the country being less exposed to UK and European markets due to its Asian orientation. However, there will be some consequences for the Australian share market.
Firstly, Brexit is likely to add to general market volatility, which could see downward pressure on interest rates and a reduction in the value of the Australian dollar. This weaker Australian dollar could provide some protection to the Australian economy, but it may also lead to reduced investment, particularly in the share market.
Secondly, Australian businesses with partnerships in Britain could experience changes to economic laws and trade agreements, which may affect their operations and profitability, and therefore their attractiveness as an investment. This is especially true for businesses that use the UK as a pathway to trading in the EU, as they may find a reduction in opportunities for new deals in Europe. This could be further exacerbated if other countries follow the UK's lead and leave the EU, as suggested by Paul Taylor of Fidelity International.
On the other hand, Brexit could also present opportunities for the Australian share market. For example, UK companies may now view Australia as a platform for launching into Asian markets. Additionally, Australia could benefit from any redirection of UK foreign investment flows away from Europe, as the UK is the second-largest foreign investor in Australia.
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Trade deals with the UK
Brexit has allowed the UK to negotiate trade deals with Australia and New Zealand, which came into force in May 2023. These deals are the first negotiated by the UK after leaving the EU and are expected to drive economic growth and innovation in both countries.
The trade deals eliminate tariffs on all UK goods exports to Australia, reduce red tape for digital trade, and make it easier for UK professionals to live and work in Australia. They also provide access to the Australian market for British goods and services, including Welsh whisky, gin, bags, mixers, cricket tops, rugby shirts, and tennis rackets.
The UK-Australia Free Trade Agreement (UKAFTA) has specific benefits for architects, allowing them to provide services under contract in either country and work in the other country for up to four years, double the previous term.
However, the trade deals have been criticised as one-sided, particularly for British farmers. Former Environment Secretary George Eustice and others have argued that the UK "gave away far too much for far too little in return," with the deal projected to raise Britain's GDP by only 0.08% by 2035.
Despite these concerns, the UK government maintains that the deals deliver on their priorities to grow the economy, drive innovation, and increase highly skilled jobs, ensuring prosperity for generations to come.
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Frequently asked questions
Brexit refers to the process of Britain leaving the European Union and changing its relationship with the bloc on topics like security, trade, and migration.
The UK is Australia's fourth-largest trading partner, to the tune of $10.4 billion. The impact of Brexit on Australia's economy will depend on the nature of the UK's withdrawal from the EU. In the short term, there will likely be extreme volatility in the global markets, which could lead to turmoil. The Australian dollar could rise against the British Pound but fall against the US Dollar.
Australian businesses should prepare for Brexit, as there may be changes to the arrangements they rely on in the UK and EU, as well as disruptions to trade. For example, some Australian businesses claim that meat exports have already suffered due to Brexit.
The Australian Government is working closely with industries to ensure Australian exporters can continue to export to the UK. The government has also reached an agreement with the EU and an in-principle agreement with the UK on amended export quota arrangements.
