Britain may be at the other side of the world from us here in Australia, but we can definitely still feel the tremors. As a member of the Commonwealth, Australia is still linked to the UK. Now that Britain has left the EU, Australians have started to question the benefits of remaining as part of ‘little Britain’.

Does Brexit Diminish Britain?

With Britain voting to leave the EU, some do feel that it has diminished its world standing, with some going as far as to say that it has lost its status as ‘Great Britain’ and instead become ‘Little Britain’.

In the aftermath of the decision, the pound plummeted in value, the Prime Minister resigned and the FTSE 100 went into meltdown. Now, the position of the currency and the FTSE industries as stabilised, and a new Prime Minister has been appointed: Theresa May.

This has crushed much of the uncertainty in the markets but, until Britain invokes Article 50 and negotiates a deal to leave the EU, much of it will still remain. Crucially, even at this early stage, we have to ask how Britain’s decision affects investments in Australia and its trading capacity. Could it even end up with Australia exiting the Commonwealth? In this post, we take a look.

How Brexit Affect’s Australia’s Trade Links

For the past couple of years, Australia and the EU have been holding preliminary talks about the creation of a free trade agreement. However, with Britain now leaving the EU, it appears as though those talks will now be put on hold, and Australia will have to also strike a separate trade deal with the UK, too.

Now that Britain has left the EU, Australian businesses no longer get the benefit of using the UK as a base from which to expand into Europe. As such, in the coming months, we could see a weaker relationship between Australia and London.

Of course, any renegotiation of these trade agreements will have a very disruptive effect on Australian businesses, with further disruption for Australian firms that use the UK as an entry point to the UK. As a result, many economists predict that the most serious impacts will be felt in specific markets, such as the wine exporting industry. This is something that share CFD traders will have to be wary of, and they’ll need to monitor the markets closely. The macro economy, however, will not be seriously affected and we shouldn’t see any big changes for businesses.

Brexit and Australian Currency

Prior to the referendum result, Glenn Stevens, the Reserve Bank Governor, said that the referendum result had increased expectations of volatility in the pound’s exchange rate against the US dollar.

Forecasters predicted that, if Britain left the EU, then the dollar price would fall, but only as a short term hit. It isn’t thought that the value of the dollar will be adversely affected in the long term, which is good news for traders and businesses alike.

Will We See an AusExit Campaign?

So, with Britain leaving the EU, is now the perfect time for Australia to leave the Commonwealth?

The calls for an AusExit have gained momentum since the historic vote for Britain to leave the EU. This would include Australia removing the Union Jack from its flag and no longer having the Queen as the head of state.

It is thought that this increase in anti-British feeling stems from the fact that Britain is no longer in the EU, reducing itself from its status as ‘Great Britain’ to ‘Little Britain’.

However, although growing in strength, it’s also important to note that it still isn’t a mainstream mood. Australians voted against changing to a republic at a referendum in 1999 and polls have since indicated that support for the change has stagnated somewhat since.

Australia and Britain, of course, share very close cultural ties, but these have weakened over the past 40 to 50 years or so. This has particularly been the case since Britain first applied to become a member of the EEC, because Australia was heavily dependent on the UK as a market for minerals, meat and dairy.

In addition, there’s still a degree of ill will towards the UK for its role in getting Australia involved in battles at Gallipoli and Singapore.

However, although the Britain leaving the EU will cause minor tremors in both the Australian markets and the Australian government, there are no signs that it will cause any major concern at the highest level, and talks of an AusExit do seem incredibly premature at this early stage.