The Australian economy, which has not seen a recession in the past 26 years and has survived every major financial crisis in modern history, is set for steady growth if the Australian government can successfully pull off a trade deal with the UK. At the same time, the Australian government has a historic chance to pull off a deal with the European Union as well. The free trade agreement (FTA) talks between Australia and the EU are an exceptional opportunity to boost the Australian economy even more.
While it will take up to two more years before the UK officially leaves the 28-nation block, there is enough time for private negotiations before that deadline. In this regard, the Australian government is already conducting talks with Britain regarding a trade deal that will benefit both countries.
Officially, the UK can only sign new trade deals after the Brexit transition period, which is set to start from 30 March 2019 until the end of Dec 2020. The Australian economy will only begin to see the benefits of a new trade deal from 2021.
The informal and preliminary negotiation on the trade deal will have the advantage of delivering a quick deal at the start of the transition period, which is in Australia’s interest if it wants to have special trading relationship post-Brexit. Australia and the UK already have very close economic ties.
If Australia manages to increase its goods and services going to the UK, then we might see the Australian economy grow by 3% in the next couple of years which is in line with the RBA GDP growth forecast. Australia’s top 10 goods and services exports in 2017 total more than $373 billion, according to the DFAT Stars database.
On the other hand, the UK has imported more than double the number of Australia’s imports – around $644 billion. Currently, the UK is the tenth largest trading partner of Australia with a total trade volume of about $4.6 billion or 2% of total Australian exports.
Australia will be able to boost their exports to the UK. Exports affected will be agricultural products, especially meat (beef and lamb); food and wine, and it can also benefit from the US tariffs on steel and aluminium imposed against Europe by the Trump administration.
The Australian economy is a service-based economy as the service sector makes up 60% of the Australian GDP, and thus it is not solely relying on exporting commodity resources.
In a worst-case scenario, where the UK and Australia do not reach a free-trade agreement, the Aussie economy will not suffer significant headwinds.
In the best case scenario, a bilateral trading agreement between Australia and the UK would benefit both economies. Currently, the UK, as a member of the EU, is it only free to trade within the EU. But once the UK is outside of the EU protectionist block, and the UK economy opens up to post-Brexit opportunities, it will be able to determine which Australian imports it needs with significantly more freedom.
Australia also imports large amounts of manufactured goods from the UK so that the Australian consumer would see the benefits of cheaper British cars, products, and more advanced manufacturing.
Finally, a free trade deal would also include more favourable visa access which is very attractive because the skilled Australian workforce would benefit from being able to work and live in the UK under more advantageous conditions.