How does Brexit effect Australian property values

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The United Kingdom (UK) withdrawing from the European Union (EU), has had a domino effect on the entire global economic system. Brexit, a result of the June 2016 referendum has caused instabilities not only in the economical sphere but also in the social and political spheres. This monumental decision has had ramifications in the day-to-day lives of more than millions in ways more than one, shaping the bigger picture as a whole.

 

However, turmoil in the global economy doesn’t affect the actual Australian economy greatly because the UK is not a massive trading partner of Australia.

 

Scott Haslem, UBS economist, says, ’Less than 4 per cent of Australia’s goods exports went to the UK and about 5 per cent to Europe, compared with about 75 per cent to emerging markets.” Hence the  figures exhibit why logically the brexit caused economic mayhem would not affect Australia severely. However UK being Australia’s 7th largest trade partner, has been a significant contributor in its recent GDP growth which owes a lot to the export business. Hence on a long term, Brexit and the affected global economy would have an effect on the Australian economy as well, however small or big its scale might be.
The immediate instability has instilled fear in the minds of the investors, and has limited the spending capability of many. With the ‘risk off’ mentality playing a major role, the Australian stock market has taken a hit. Furthermore, if the United States Federal Reserve refuses to or delays in raising the interest rates, the Australian dollar’s value would be higher than the RBA would prefer. This may  stimulate the RBA to cut interest rates again, in an attempt to kindle the economy and lower the Australian dollar.

The other ways Brexit would affect the Australian economy are:

1. Decrease in the value of the pound would mean an impending loss for those who have assets and pensions in the United Kingdom.

2. The thousands of British tourists visiting Australia would have lower spending power, affecting the tourism industry and as a result the economic system.

4. There would be a major decline in securing funds from off-shore, as a result of which as we earlier discussed the share prices will fall drastically and government aid will have to be sought again.

In this era of globalisation, the economic growth or downfall of a country depends not only on its own workings, but also on the collective financial condition of the entire world. Hence, it’s needless to say, Australia too has been affected by Brexit, but the established fact is, it’s not one of the worst hit countries.

 

 

2017-10-06T19:21:45+00:00

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