Professor Richard Holden talks about the economic impact of Brexit. The Conversation18.2 MB(download)
The UK has voted to leave the European Union but even before all the votes were counted volatility made its way across Asian markets and to Australia.
The S&P ASX200 has finished 3.3% down at the close, wiping off approximately $50 billion in value, while the Australian dollar has dropped 3.4% to 73.4 US cents.
Richard Holden, Professor of Economics at UNSW says the volatility is likely to continue at least for another 24 hours.
“We could see volatility, perhaps not as extreme as the current levels, for a really extended period of time,” Professor Holden says.
One of the major factors in this will be how affected UK banks and therefore Australian banks will be by this decision, as they rely on short term funding for their operations.
“If those markets start to dry up and there’s uncertainty about their funding getting rolled over, one day to the next, then that’s when things can go pear shaped within an incredibly short period of time,” he adds.
The position of hedge funds, banks and other financial institutions in betting on currencies in over-the-counter markets (not regular currency markets) in times like this, also adds to the uncertainty.
“Basically we don’t know, what we don’t know and suddenly there’s a liquidity crunch and someone gets into trouble and that has flow-on effects like we saw in 2008,” Professor Holden says.
He also warns that a drop in the Australian dollar shows that money could flow out of Australia and back to the UK as financial institutions there change their positions.
In the longer term, Brexit could affect the way Australian companies trade with the European Union through the UK.
“All of a sudden that’s going to be more complicated, it’s going to have to go through under some new trade agreement and we know that a series of bilateral trade agreements are always more complicated and have more nuance than large multilateral trade agreements,” Professor Holden says.
All this comes as Australia goes into the last week of an election campaign and this volatility will keep economic management top of mind for Australian voters.
“I don’t think either side of politics in Australia has an exclusive right to say they are going to be the best economic managers, I guess we’ll have to wait and see about that as well.”
Britain’s decision to leave the European Union has opened a fundamental crack in the western world. Australia’s relationship with the United Kingdom is grounded in the UK’s relationship with the EU.
Given Australia’s strong and enduring ties with the UK and the EU, the shockwaves from this epoch-defining event will be felt in Australia soon enough. Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive.
What will happen to trade ties?
The importance of Australia’s relationship with the EU tends to get under-reported in all the excitement about China. We might ascribe such a view to an Australian gold rush mentality. Nevertheless, Australia’s trading ties to the EU are deep and strong.
Such ties looked set to get stronger. In November 2015 an agreement to begin negotiations in 2017 on a free-trade deal was announced at the G20 summit in Turkey. Trade Minister Steven Ciobo said in April 2016 that an Australia-EU free trade agreement:
… would further fuel this important trade and investment relationship.
When considered as a bloc, the EU consistently shows up as one of Australia’s main trading partners. Consider the statistics below:
in 2014 the EU was Australia’s largest source of foreign investment and second-largest trading partner, although the European Commission placed it third after China and Japan in 2015;
in 2014, the EU’s foreign direct investment in Australia was valued at A$169.6 billion and Australian foreign direct investment in the EU was valued at $83.5 billion. Total two-way merchandise and services trade between Australia and the EU was worth $83.9 billion; and
the EU is Australia’s largest services export market, valued at nearly $10 billion in 2014. Services account for 19.7% of Australia’s total trade in goods and services, and will be an important component of any future free trade agreement.
This is all well and good. But when not considered as a bloc, 48% of Australia’s exports in services to the EU were via the UK; of the $169 billion in EU foreign direct investment, 51% came from the UK; and of Australia’s foreign direct investment into the EU, 66% went to the UK.
You get the picture.
The UK was Australia’s eighth-largest export market for 2014; it represented 37.4% of Australia’s total exports to the EU. As Austrade noted:
No other EU country featured in Australia’s top 15 export markets.
In short, the EU is not as attractive to Australia without Britain in it.
Beyond trade numbers
But the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.
Brexit represents the further fracturing of the West at a moment when that already weakening political identity is in relative decline compared to other regions of the world, notably Asia (or more specifically China).
EU-Australia relations rest on shared concerns such as the fight against terrorism advanced through police collaboration and the sharing of passenger name records. The EU and Australia also collaborated to mitigate climate change at the Paris climate summit. And they work for further trade liberalisation in the World Trade Organisation – but don’t mention agriculture.
Without the UK, these shared political tasks become harder.
Clearly, Australia-UK relations rest on a special historical relationship. However, it has seen efforts at reinvigoration, as British governments buckled under the pressure of the Eurosceptics among the Conservatives.
Beyond everyday trade, historical links have been reinforced through the centenary of the first world war and the UK-Australia commemorative diplomacy that has come with this four-year-long event.
Cultural ties are most regularly and publicly affirmed through sporting rivalries such as netball, rugby and most notably cricket. Expect these ties to be reinforced as the UK seeks trade agreements and political support from its “traditional allies”.
For those with British passports, there will be a two-year period of grace as the UK negotiates its exit. After that, it will be quicker to get into the UK at Heathrow, but this might be small consolation for the loss of a major point of access to the EU.
The vote to leave is a major turning point in Europe’s history. It marks a significant crack in a unified concept of “the West”. It is not in Australia’s interests.
It’s time for Australia to make new friends in Europe.
And yet, the Australian government and the Labor opposition maintain an unwavering, untested, bipartisan assertion: no-one will be resettled in Australia, as that will encourage people smugglers.
By extension, Australia will not accept New Zealand’s offer to resettle 150 refugees, as that will provide an equivalent incentive to the people-smuggling trade.
The historical evidence suggests the government’s fears are unfounded. People smuggling will not revive simply because refugees are resettled in Australia. There are good reasons to believe refugees currently stuck in offshore detention on Nauru and Manus Island can be relocated to Australia and New Zealand without this leading to a revival of boat traffic.
A short history
Offshore processing and turning back boats on the high seas were introduced in 2001 and again in 2013 in response to a growing number of boat arrivals.
Between 1999 and October 2001, more than 10,000 asylum seekers arrived on Christmas Island by boat. Between June 2011 and September 2013, 40,000 people arrived. But when offshore processing and turnback policies were introduced, the boats stopped arriving in both periods within months.
But what happened to the asylum seekers detained offshore during the Howard government years?
From 2001 to 2008, of the 1,153 refugees and asylum seekers resettled from Nauru and Manus Island, 705 went to Australia, 401 to New Zealand and 47 to other Western countries. Resettlement of all but 82 occurred under the Howard government, with most occurring from 2002 to 2004. A further 483 people were found not to be refugees and returned to their countries of origin.
The resettlements occurred without fanfare, while maintaining the official policy of offshore detention and processing, and boat turnbacks. From 2002 to 2007, 18 boats arrived with 288 asylum seekers. In addition, one boat was turned back with 14 passengers.
In 2008, after the Rudd government dismantled the offshore processing and turnback policies, seven boats arrived with 161 asylum seekers. This number spiked dramatically from that time.
This analysis suggests the threat of offshore detention and processing and boat turnbacks is a clear deterrent to prevent people coming to Australia by boat. Importantly, the deterrent effect does not rely on a blanket ban on resettlement of refugees from Nauru and Manus Island to Australia and New Zealand.
No long-term resettlement options
Accept for the moment that offshore processing and boat turnbacks are necessary to deter asylum seekers from travelling by boat to Australia.
Accept that these policies stem an uncontrollable flow of humanitarian migration through Indonesia to Australia, prevent people drowning at sea and enable Australia to resettle more refugees through the UN High Commissioner for Refugees’ resettlement program.
The policy issue in 2001 and 2013 was the uncontrollable arrival of boats. But the issue now is where and when to resettle refugees and asylum seekers who have been sent to Manus Island and Nauru since the reintroduction of offshore processing. On this issue, there is no plan.
If this analysis of the incentives proves to be wrong, and it turns out that resettling refugees from Nauru and Manus Island in Australia and New Zealand does increase the number of asylum-seeker boats attempting to reach Australia, we know from the experiences of 2001 and 2013 that the combination of offshore detention and boat turnbacks is an extremely effective deterrent – one that can swiftly be reinstated.
In July 2013, the month Kevin Rudd announced no asylum seeker arriving by boat would ever be resettled in Australia, 4,338 people arrived by boat in Australia. After Rudd announced the new policy, the number dropped to 1,650 in August and 861 in September. None of these asylum seekers ended up in Australia, instead being transferred to Nauru or Manus Island.
In October 2013, when the new Coalition government added a turnback policy to offshore processing and resettlement, 346 people were intercepted and transferred to Nauru or Manus Island. This dropped to 222 in November, then rose to 369 in December. And then, in the 31 months from January 2014 to the present, there has been just one boat with 158 passengers transferred to Nauru.
In addition, from January 2014 to July 2015, 20 boats were intercepted and turned back to Indonesia or other countries in the region, carrying a total of 633 passengers.
At any time offshore detention and processing have been in place, the number of boat arrivals has been very small. We can be confident that, if necessary, a vigorous reinstatement of regional processing and the turnback policy would once again “stop the boats”.
But at this time, in light of the ongoing and intensifying humanitarian crisis on Nauru and Manus Island, there is no case for maintaining the inflexible bipartisan line on resettlement.
Alex Reilly, Deputy Dean and Director of the Public Law and Policy Research Unit, Adelaide Law School
A writ of summons was registered in Australia’s High Court on Wednesday on behalf of 859 detainees at the Manus Island detention centre. This is a class action initiated against Australia, Papua New Guinea, the two countries’ immigration ministers, PNG’s attorney-general and the companies that administer the centre.
The detainees want the High Court to use its original jurisdiction in judicial review of their transfer to and detention on Manus Island. They seek an injunction to prevent their removal to Nauru or elsewhere until the court hears the matter.
This action follows the PNG Supreme Court finding that the detention on Manus Island is unconstitutional. The PNG Constitution contains a Charter of Rights that strictly limits the circumstances under which people may be deprived of liberty.
As Australia forcibly transferred the detainees, they were not responsible for their own unlawful entry to PNG. Therefore, no constitutional exception could permit their legal detention.
Following the Supreme Court decision, PNG Prime Minister Peter O’Neill announced the Manus Island centre would close. He asked Australia to “make alternative arrangements for the asylum seekers”.
O’Neill’s Australian counterpart, Malcolm Turnbull, said Australia would not accept the detainees. Australia’s immigration minister, Peter Dutton, described them as PNG’s responsibility.
Basis for the claim
The detainees argue their detention is illegal on international, constitutional, administrative and civil law grounds. They are asking the High Court to declare that their detention constitutes:
forcible deportation, due to their expulsion from Australia and transfer to Manus Island, contrary to international law;
murder (notably the violent killing of Reza Barati in February 2014), grievous bodily harm, assault and robbery; and
unlawful death, false imprisonment, trespass and negligence.
What are the detainees seeking?
The detainees request relief via the ancient writ of habeas corpus. They want to be brought before the High Court so its judges can determine whether their detention is legal.
The detainees hope the court will then issue a writ of mandamus. This would order the government to bring them to Australia to process their refugee claims.
Finally, the detainees seek a writ of prohibition, to prevent their transfer to any other place until the case has been decided and their claims assessed.
The detainees are seeking damages and costs. They may also take action in PNG for compensation. A PNG legal representative of many detainees estimates that up to A$1 billion could be owed.
This action echoes earlier high-profile claims, like the Tampa case. In such cases, human rights lawyers seek to vindicate the rights of asylum seekers who lack access to Australian courts due to their forcible offshore detention.
The High Court will hear the application on May 23.
Australia’s human rights problem
Around half of those detained on Manus Island have already been assessed to be genuine refugees. Yet most remain in detention, in part because their safety is at risk if they leave the centre.
The refugees would not face the same level of risk were they to be resettled in Australia. Yet PNG law has offered more substantial rights protection to them than Australian law.
The stark contrast between Australian and PNG law is in the relative degree of formal protection for human rights. Whereas PNG has a Charter of Rights enshrined in its Constitution, Australia lacks constitutional protection. Its government has rejected legislative protection for human rights.
Though Australia professes deep commitment to human rights standards in its foreign relations, it refrains from entrenching these international norms domestically. This position reflects a cultural attitude that the Australian “fair go” is sufficient protection against the excessive use of government power.
The experiences of Indigenous peoples in Australia before the law put the lie to this belief. And if adequate human rights protections are not the universal experience of people in Australia, what hope for asylum seekers who lack access to Australian courts and are demonised in public discourse?
However, the majority of judges did regard Australia as bearing at least some responsibility for the detention of asylum seekers in Nauru. This may undermine the government’s argument that detainees on Manus Island are PNG’s sole responsibility.
This new action’s distinguishing feature is a request that the High Court use its universal jurisdiction for the first time. The detainees argue that Australia has no legal power to forcibly deport and arbitrarily and indefinitely detain asylum seekers in torturous, inhuman or degrading conditions without legal rights.
If the claim succeeds, it will entirely undermine Australia’s inhumane practices in relation to “those who come across the seas”.
Amy Maguire thanks Jay Williams, barrister-at-law of Frederick Jordan Chambers, for providing the original writ of summons used to initiate this action in the High Court.
It is hard to credit that two asylum seekers in Nauru could set themselves alight on Australia’s watch and the stories receive, compared to much else, so little attention in our hyper media cycle.
One would think the death of an Iranian man last week and the self-immolation of a Somali woman would be huge news, putting a great deal of pressure on the government as we move towards the election to outline an exit plan for Nauru.
But in the campaign the future of those on Nauru will be something neither side will be anxious to talk about.
Manus Island hit the headlines recently when the Papua New Guinea government announced, following a judgment of its Supreme Court, that the centre there will close.
Australian and PNG officials are now in negotiations that Australia hopes will find a way to keep the centre going. In a Tuesday statement the two governments said they’d continue “to work together on a road map”, meeting “regularly in the coming weeks”, which suggests the matter is being pushed safely beyond the election.
The government and the opposition are bipartisan on offshore processing. When it arises, the issue plays in favour of the Coalition, but it is not one Malcolm Turnbull seems naturally comfortably with. For political reasons Labor obviously tries to avoid it. That means the government isn’t being held to serious account – despite efforts by the Greens – in the way it is on much more minor matters.
In her valedictory speech on Wednesday, Labor MP Melissa Parke described the present system as “a festering wound that is killing off people and eroding our national character and respect”. Some in Labor are deeply unhappy and a few have been recently vocal about the ALP’s approach, but most don’t want the boat rocked.
As for the Liberals, those who used to speak up for asylum seekers have either left the parliament or gone quiet.
Amid his Wednesday media round of budget questions Turnbull was asked whether he ever thought he’d be defending keeping people in a position where they were so desperate they were killing themselves.
Turnbull sympathised with “the mental anguish that many of them are in … we grieve for them”, before swinging into the mantra that to keep our borders secure, people who sought to come to Australia by boat couldn’t be allowed to settle here.
Pressed on their future, Turnbull said the people on Nauru could move around there (it is an open centre); those on Manus judged to be refugees could settle there. There were also third-country options, while non-refugees were being encouraged to go home.
There was a hint of blame, when he suggested many had been led to believe they could end up being admitted to Australia.
Immigration Minister Peter Dutton has taken up a shovel to lay blame, bluntly heaping it on the activity of advocates. In a Tuesday statement on the Somali woman, Dutton said it was “of grave concern” she would “resort to such an extreme act of self-harm”.
“I have previously expressed my frustration and anger at advocates and others who are in contact with those in regional processing centres and who are encouraging them to engage in behaviours they believe will pressure the government to bring them to Australia. These behaviours have intensified in recent times, and as we see, have now turned to extreme acts with terrible consequences.
“Advocates and others who proclaim to represent and support the interests of refugees and asylum seekers must hear a clear message that their activities and these behaviours must end.”
In parliament on Wednesday, the Greens’ Adam Bandt challenged Dutton with a highly provocative question. “Aren’t you just showing pure cowardice by blaming the advocates helping the vulnerable, instead of accepting responsibility for your actions?” Bandt asked, then added: “Can’t we do better than this Labor-Liberal policy of not drowning, but burning?”
It was Manager of Opposition Business Tony Burke who jumped up to declare this was deeply offensive to all MPs. Bandt had to withdraw his “burning” line.
Dutton’s allegation must be deeply offensive to many advocates. More to the point, it is a cop-out – responsibility for what has become, in academic jargon, one of those “wicked problems” has to lie with the government.
Desperation and apparently extensive mental health problems mean the situation on Nauru is only likely to get worse. Having people there indefinitely is not a viable proposition. A workable strategy is needed, which also keeps the Australian border secure.
One of the debates of the coming campaign should be the search for practical answers. But it is a debate the government and opposition are not prepared to have, and nor are the media willing or able to give them a hard enough time to force them into it.
It’s a case study in how interests and circumstances conspire to push some issues off-stage in an election.
For those yet to see this inspiring piece of economic policy/politics from Australia, or perhaps you just want to see it again (for some reason), here is the Australian 2016 budget being delivered by Scott Morrison.
In the weeks before Anzac Day, a flurry of news stories emerge mobilising Australians to remember the Anzacs. We see in them familiar references to “The Diggers”, with their virtues of mateship, sacrifice and courage, and the “birth” of the nation at Gallipoli. As Kevin Rudd said in 2010,
All nations are shaped by their histories, their memories and their stories.
When we retell a story, we actively choose which parts to retell. Our present day positions, our politics, our families and our environments all have considerable bearing on these choices.
Such choices of representation also apply to nation-building narratives, which are then used for the political purposes of the day – such as John Howard’s use of the “Anzac myth” to support military interventions in Afghanistan and Iraq.
We call this process of choice the “politics of memory”. Generally, it supports a resoundingly masculine dominant Australian folklore – encompassing bush mythology, a pioneering spirit, sportsmanship, larrikinism, and mateship. It’s populated by characters such as Ned Kelly, the “jolly swagman” of Waltzing Matilda or Crocodile Dundee.
When “we” as a nation remember Anzac, we simultaneously forget significant parts of the story not commonly represented. Influencing this (selective) forgetting is an implicit whiteness.
As anthropologist Ghassan Hage argued in his book White Nation, despite the emphasis placed on multiculturalism in Australia,
the visible and public side of power remains essentially Anglo-White.
Significant events, like Anzac Day, are opportunities to reiterate an approved narrative of war-centred nationalism – and vigorously disparage any form of critique that might arise.
Examples of non-conformance to collective Anzac narratives are rare, but they do occur. A particularly visible debate arose out of the film The Water Diviner (2014), directed by and starring Russell Crowe. While focusing on Gallipoli, the film offers an account that foregrounds a Turkish perspective on the campaign.
The film triggered the ABC’s Radio National History Podcast, released in 2015, to ask the question: “Is The Water Diviner … redefining our ANZAC legend?”
Another prominent example is former SBS reporter Scott McIntyre, who was stood down for tweeting controversial views about Anzac Day:
McIntyre’s dismissal shows that, in the midst of the well-supported and popular Anzac narrative, contested and not-so-salubrious parts of the story aren’t tolerated and get little public airtime. Indeed those who deviate from the narrative line are vilified.
The Australian government ensures that the nation remembers Anzac each year by marking the event with a collective commemoration. As a settler society, collective remembrance is an important government function. But how, what, where and why we remember should be relevant to our geographically disparate and culturally diverse populace.
Slowly creeping change
For many years the hard lines drawn around Anzac memory excluded recognition of Indigenous involvement in WWI, even in official commemorations.
Returned Indigenous soldiers encountered considerable discrimination. They were excluded from early attempts to commemorate military service and the war dead; forgotten in the war memorials; denied the right to participate in Anzac Day marches, and refused access to veterans’ benefits and entry into RSLs.
Since the 1990s, a number of attempts to commemorate Indigenous war service have occurred, contributing to what historian Peter Cochrane calls a “new inclusiveness”.
These early efforts tended to materialise on the margins: a plaque to Indigenous war service erected on public land behind the Australian War Memorial by a private citizen in 1993; a commemoration in Burleigh Head National Park inscribed in 1991; and an Australian War Memorial travelling exhibition, Too Dark for the Light Horse, that toured Australia in 1999 and 2000/1.
More recent demands have more successfully permeated the politics of Anzac memory, resulting in Indigenous memorials in shared spaces. These include the Torrens Parade Ground memorial in Adelaide, completed in 2013 and commonly referred to as Australia’s first memorial to all Aboriginal and Torres Strait Islander servicemen and servicewomen.
Historical media research by Catherine Simpson details this movement from “foe” to “noble Turk”, culminating in a nationally celebrated, government-constructed, friendship.
Similar questions can be raised about the inclusion of other national groups. We’ve seen a rising interest in researching, for example, German, Irish, Russian or Chinese “Anzacs” who were fighting on the Gallipoli peninsula. Soldiers of many nationalities have been present with Australian troops in numerous conflicts, including Gallipoli, Kokoda and Vietnam.
What is Anzac’s future in multicultural Australia?
Should Australians not born here be expected to “inherit” the Anzac narrative unequivocally, and exactly how would that happen? And does not identifying with Anzac really equate to being un-Australian?