It may be happening far away, but Australia could be deeply affected by the messy Brexit situation still ongoing in the UK.
“Brexit is a bit like separating the yolk from the white after making an omelette,” says UNSW Business School’s Tim Harcourt. “The democratic will of British people must be respected, but few of them realise how high the divorce bill will be.”
Leaving the European Union without a divorce deal could plunge Britain into its deepest recession in nearly a century, Harcourt addds: “There is a chance, as the Bank of England has warned, that the economy could shrink eight per cent, while unemployment and inflation will soar. Euro-vision is clearly lacking – and the implications for Australia could be profound.”
Over the weekend it emerged that if Parliament rejects Prime Minister Theresa May’s deal, Britain could be headed for an economically disruptive ‘No Deal’ Brexit on 29 March 2019, or there could be another referendum.
EU leaders have already accepted the UK’s Brexit deal. They said the deal – which now needs to be approved by the UK Parliament – paved the way for an “orderly withdrawal”.
“I really do hope it will orderly, because at the moment it’s looking like a car crash. It’s only four months until Brexit. And doesn’t time fly when you have to stockpile food and medicine,” Harcourt says.
He understands why the European Union wants to make Brexit hard for the UK so there is less of an incentive for others to follow. But at same time it doesn’t want to weaken the UK economy.
The UK’s opposition Labour party has also said it will attempt to topple Mrs May and force a general election if MPs reject her deal.
“That would really worry business,” Harcourt explains. “Companies like stability, but now everyone is staring down the barrel of a no deal Brexit, and going into either a knife edge referendum or an uncertain election looks like an economically brave decision. Some might even call it courageous.”
Tim Harcourt is the JW Nevile Fellow of Economics UNSW Business School and adds: “The EU is still an important institution in geopolitics facing the rise of China, India, Russia, and Trump protectionism.”
Harcourt attended the European Union Australia Leadership Forum in Brussels and says Australia may have been “let of the hook” in Asia as UK has focused in Brussels.
“It was clear there that Australian companies are happy to remain in the UK as an economy in its own right. But Australian exporters are suffering a bit from Europhobia and Brussels wants them to have some euro-vision,” he says.
Tim Harcourt was previously chief economist at Austrade. As a trade specialist at UNSW he has studied the international trade landscape for many years and provides commentary on all parts of a prospective trade agreement with the UK and Australia.
His TV series, The Airport Economist will feature a UK special episode discussing Brexit, airing at 8.30pm on December 15th on the Your Money free-to-air channel.