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IMPACT OF BREXIT ON AUSTRALIA

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IMPACT OF BREXIT ON AUSTRALIA

IMPACT OF BREXIT ON AUSTRALIA

Introduction

The UK has played an important role in molding Australia as an independent nation. The first settlement in Australia took place when the First Fleet consisting of 11 ships reached Australia from the UK in the year 1788. Australia remains a member of the British Commonwealth. Australia has a similar legal system and form of governance to the UK. The UK has significant cultural ties with Australia. However, the last few decades have seen a decrease in the impact that the UK previously had over Australia. Australia has strengthened its position as a nation in the wider global community, the Asia-Pacific region in particular. At present, China, Japan, South Korea and Singapore are four of the top five trading partners of Australia. As a result of this, the overall effect of Brexit on Australia has been minimal.

The tourism industry may be the industry that is hardest hit by an economic downturn in the UK. About 7 per cent of Australia’s export in travel is to the UK, which is expected to decrease when the UK goes through low or negative growth over a period of time. However, domestic tourism in the UK may experience a boom owing to the fall of the value of sterling. A depreciating UK sterling is further expected to compound this factor (Carroll and O'Dea Lawyers, 2017). On the other hand, Brexit is expected to bring about a decrease in visitor arrivals to Australia from the UK and Europe (Department of Foreign Affairs and Trade, 2017).

The real estate industry is expected to benefit from Brexit. Australia has been considered a safe-haven for real estate investors, both domestic and commercial. This is a result of Australia’s solidarity, low sovereign risk and economic growth. Australia attracts a lot of global capital in the commercial real estate industry and it has been observed that it competes with locations within Europe in most cases. The economic slowdown in Britain and Brexit has led to greater uncertainty in the mind of real estate investors to invest in property in Britain and Europe in general (Favell, 2017). As a result of this, Australia is expected to be more attractive for commercial property investors and seekers. Similarly, the residential property market is expected to see a positive upturn as a result of Brexit, as Australia will be seen safe compared to the uncertainty and volatility surrounding Britain and Europe (NewsComAu, 2017).

Body

Outbound tourism from Australia to the UK has declined post Brexit. According to Andrew Shelton, the Managing Director of global flight search and travel deals website, Cheapflights.co.uk has revealed that flight searches to the UK from Australia has decreased by 12% in the 3 months post Brexit (Travel Daily UK, 2017). This may be attributed to various issues likely to be faced by outbound tourists from Australia to the UK. Firstly, the direct implication of Brexit means that anyone travelling from Australia to Britain will need a separate visa. Most Australian travelers tend to base themselves in the UK and travel back and forth to the EU (Akinsomi et al, 2016). This means that these Australian travelers would need two visas, one for entering the UK and another for all other EU countries. This would lead to additional headache for the Australian travelers and is expected to result in a decrease in the number of travelers from the Australia to the UK (Mail Online, 2017). However, a decrease in valuation of the Pound Sterling due to uncertainty and volatility in the UK and the EU in the short-term as a direct result of the Brexit means that the purchasing power of the Australian traveler will increase and this might influence the Australian travelers to visit the UK during the economic slowdown in the UK. On the long-term, outbound tourism from Australia to the UK is expected to decrease post Brexit owing to visa troubles and low or negative growth of UK (Portes, 2016).

Inbound tourism from UK to Australia increased by 2% in the September 2016 quarter, post Brexit. Speculations saying that consumer confidence would plummet post Brexit has not been fulfilled yet. This sentiment is expected to change when inflations starts to set in during 2017 and consumer have a more concise understanding of the Brexit plan. However, visitor spending decreased 15 per cent off the back of an 18 per cent decrease in visitor nights. The rapid decrease in the valuation of Pound Sterling is believed to have influenced the length of stay in Australia and spending power among business travelers and VFR in the immediate quarter post Brexit (www.tourism.australia.com, 2017). UK Visiting Friends and Relatives arrivals declined by 2% and average length of stay also declined to 25 nights. A devaluation of the Pound Sterling means that its purchasing power decreases in respect of the global community. Travelers from the UK to Australia faced a decrease in purchasing power of their funds. This directly resulted in the decrease in visitor spending from the UK to Australia. It also led to a decrease in the average length of visitor nights. These have been the short-term results of Brexit on inbound tourism from the UK to Australia. In the long term, inbound tourism from the UK to Australia is expected to further decline if the UK goes through a sustained period of economic slowdown post the full-scale implications of Brexit.

References

Akinsomi, O., Coskun, Y., Gupta, R. and Lau, C.K.M., 2016. Impact of Volatility and Equity Market Uncertainty on Herd Behavior: Evidence from UK REITs.

Anon, (2017). [online] Available at: http://www.tourism.australia.com/documents/corporate/TAINT11054_QMU_-_December_2016_(September_Data).pdf [Accessed 9 May 2017].

Barkham, R. and Holberton, R., 2017. The real world of real estate: How economics and geopolitics affect occupiers. Corporate Real Estate Journal, 6(3), pp.194-204.

Carroll & O'Dea Lawyers. (2017). Impact of Brexit - An Australian Perspective - Carroll & O'Dea Lawyers. [online] Available at: http://www.codea.com.au/publication/impact-brexit-australian-perspective/ [Accessed 9 May 2017].

Department of Foreign Affairs and Trade. (2017). Brexit could impact UK visitor arrivals to Australia. [online] Available at: http://dfat.gov.au/about-us/publications/trade-investment/business-envoy/Pages/brexit-edition-2016/brexit-could-impact-uk-visitor-arrivals-to-australia.aspx [Accessed 9 May 2017].



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