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Should Britain leave the EU? The view of seven Aussie economists
The decision over whether Britain will stay in the European Union fast approaching.
After years of debate, UK Prime Minister David Cameron recently announced a referendum would take place on June 23, shortly after he clinched 11th-hour concessions from other EU leaders on how the UK and the rest of Europe will live and work together.
Also read: Osborne puts Brexit onto G20's top risks
Brits themselves are undecided over a possible ‘Brexit’ despite Cameron’s EU reform deal, with some questioning potential restrictions on state benefits for EU citizens and protection for Britain’s financial sector.
Yahoo7 Finance spoke to seven Aussie economists to find out their view on the Brexit debate.
Shane Oliver, head of investment strategy and chief economist at AMP Capital:
“From an economic perspective Britain should stay in the EU for the simple reason that if they leave they could potentially lose much of the access they have to free trade with the rest of the EU and the threat such a move would pose to the British financial sector.
“Depending on the sort of exit that would ultimately be negotiated in the event of a leave vote, plausible estimates put the hit to UK GDP between -0.6% to -2.8% of GDP.
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“Either way the impact on the UK is not a huge issue for Australia.
“It could have the impact on Europe, but only if it emboldens populists in France to push towards a ‘Frexit’.
“Britain is not in the Eurozone but France is so a Brexit will not create the same fears that a Grexit or more significantly a Frexit could. Seems unlikely though.”
Colin Rogers, economics professor at The University of Adelaide:
“Britain should exit the EU despite the fact that it is now tightly integrated and the exit would be very costly for both sides.
Also read: Deutsche Bank mulls leaving Britain in case of possible 'Brexit'
“My reasons for this view are as follows:
The Euro core of the EU is a dysfunctional monetary system and already in the process of fragmentation - a Euro in a Greek bank is not the same thing as a Euro in a German bank.
The Euro group is dominated by Germany and Germany under Merkel has acted in the self-interest of Germany rather than in the general interest of the Eurozone as a whole.
There is no evidence that the political structure of the EU is capable of dealing with the flaws in the Euro design so policy paralysis results.
Consequently, I think that the Euro-zone will ultimately fracture and that will end the EU with it.
In short, as a pessimist on the Euro I expect that the EU will also ultimately unravel so a Brexit sooner rather than later may be the lower cost option.”
Tim Harcourt, a fellow in economics at UNSW Business School:
“There is unlikely to be adverse impact to the British economy if they are vote democratically to leave the EU.
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“The EU has distorted rather than created trade and the UK would do just fine with its major trading partners in and outside Europe (in the USA, Canada, Asia, Latin America, Australia, NZ) without the EU straight jacket of protection and subsidies.
“Norway and Switzerland have done fine outside the EU including as trading partner of Europe and I bet many economies wished they hadn’t ditched their own currencies signed up to the euro now.
“However the UK could retain some of the good things the EU has brought like progressive social and environmental standards, and they can still enjoy European culture, nice restaurants and holidays all the same.
“It may also allow the UK to focus on trade relations with successful economies away from Europe like Australia for instance”
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“But there is a non-economic big picture geo-political angle as well to consider.
“UK support for the EU may be important in an uncertain world with fundamentalist Islam, Putin pushing for a neo-Cold War Eurasia bloc, tensions in the South China Sea and other global problems.”
Anthony Makin, professor of economics and director APEC study centre at Griffith Asia Institute and Griffith Business School:
“Britain should leave the European Union as most of EU economies have become moribund due to over-regulation and excessive public debt.
“Public debt has mushroomed to post-war highs since the GFC, despite relatively high tax rates, because government spending, including welfare, remains very high relative to most other countries.
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“There are great opportunities for UK trade and investment with many other economies in the more dynamic Asia-Pacific region and the Americas.
“Trade and investment opportunities with Europe would still remain strong with a Brexit as it would be safeguarded by WTO rules.
“There is even the possibility that from outside Britain could enjoy better trade and investment conditions than at present, sans the expensive EU membership fee, via a renegotiated free trade deal with the EU."
Chris Caton, chief economist at BT Financial Group:
“It would be better for all concerned if Britain remained in the EU.
“While I understand Boris Johnson’s points about loss of national sovereignty, Britain has a lot to lose from the lessening of trade links that would ensue.
“Many of these would survive because of the operation of the WTO, but services trade, and financial services in particular, would be severely disrupted.
“The British banking system doesn’t need any more problems.”
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John Mangan, professor of economics at University of Queensland:
“The implications for Australia of Britain leaving the EU are not profound, particularly in the short run.
“On 2014/15 trade data, the UK is Australia’s 7th most important trade partner with a total trade of approximately $20.7 Billion, compared to China-Australia trade of $152.4 Billion and even smaller than with New Zealand ($23 Billion).
“Currently the balance is slightly in UK favour.
“Australia is increasing locked in to free trade and bilateral trade agreements and that won’t change quickly.
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“If the UK does leave the EU there will be a slight benefit to Australia’s agricultural exports and dairy.
“However, I would see a net benefit to the UK from leaving, particularly if they could then lock into the trade deals now being negotiated by USA, Canada and Australia with Asia or reinvigorate Commonwealth trade, especially with India.
“The EU is a slow growth, inflexible organisation trying to accommodate economies as diverse as Germany and Greece. A British exit would be a big blow to its long-term survival.”
Kathrin Muehlbronner, senior vice president at Moody’s Investors Service:
“We consider it positive that the referendum will take place as soon as June, as a lengthy period of uncertainty on the part of firms and investors would damage the UK's economic growth prospects.
“That said, the outcome of the referendum remains wide open.
“In our view, a decision to leave the EU would be credit negative for the UK economy.
Also read: Is Australia's economy facing another sluggish year?
“We consider it positive that the referendum will take place as soon as June, as a lengthy period of uncertainty on the part of firms and investors would damage the UK’s economic growth prospects.
“That said, the outcomes of the referendum remains wide open. In our view, a decision to leave the EU would be credit negative for the UK economy.”
The agency notes that the economic costs of a decision to leave the EU would outweigh the economic benefits.
Unless the UK managed to negotiate a new trade arrangement with the EU that preserves at least some of the trade benefits of EU membership, the UK’s exports would suffer.
Also read: Aussie dollar to hit pre-GFC lows
It would likely lead to a prolonged period of uncertainty, which would negatively affect investment.
It could also place a significant burden on policy-makers who would have to negotiate the UK’s trade relations with the EU and other countries and regions, as well as reconsider other areas such as regulatory and immigration policies.
British expats can register to vote here.
