Today’s shock win for the Leave campaign in the UK will send a wave of turbulence through world markets and add uncertainty to the already fragile global economic outlook. And there are two noteworthy political consequences for Australia.
The immediate outcome of the vote will be UK Prime Minister David Cameron resigning (with his actual departure to be some days or weeks hence). Most likely he will be replaced with the Leave campaign leader Boris Johnson. Crikey’s Guy Rundle has covered off the politics of the vote, and correctly notes that Scottish nationalists will now pursue another referendum; Sinn Fein is also talking about a referendum in North Ireland, which voted 56-44 to stay. At some point in the coming weeks, the British government will commence the formal process of negotiating its withdrawal with the EU. The problem for Britain is that the EU can adopt an all-care-and-no-responsibility approach to negotiations, because the UK automatically gets kicked out of the EU two years after commencing the exit process. There will be no pressure on the EU to agree to anything the UK wants — it can simply run down the clock to late 2018.
The economic consequences are already being felt — the pound has plunged nearly 9% against major currencies in just a few hours and equities markets have been hit hard (the ASX, for instance, is down nearly 4% today, making a mockery of Treasurer Scott Morrison’s statement that the implications would be “minimal” for Australia). There’ll be a recovery once the shock wears off, but it will take a long time for the real economic implications for the UK, the world’s fifth largest economy, to become clear — there have been repeated warnings from economists and key economic institutions that Brexit could lead to a UK recession. That means more uncertainty for the global economy, for which growth forecasts have already been repeatedly ratcheted down this year. That will, inevitably, flow through to Australia’s export markets, which are helping to maintain growth here as we transition from the mining investment boom. Whoever forms government after July 2 will have to add all that to their economic management plate.
There’s another, more subtle consequence for Australia. In the local election campaign, Malcolm Turnbull is under increasing pressure over his decision to stick with the Abbott government’s delaying tactic on same-sex marriage of holding a plebiscite after the election. Today, Turnbull admitted that no one in the government would be bound by the plebiscite result, meaning the entire $160 million process — which will likely bring homophobic abuse of same-sex couples legitimated in public discourse — will be a waste of time, and no better than an opinion poll that MPs can choose to ignore entirely. Like the moderate, centrist David Cameron holding a Brexit referendum, moderate, centrist Turnbull is holding the same-sex marriage plebiscite as a sop to the far right of his party. The UK campaign has meant an MP murdered by a Brexit supporter and shameless — and apparently successful — xenophobia and fearmongering from Leave campaigners. It demonstrated how events can spin wildly out of the control of those who set them in motion. Cameron will now pay for that with his job. What will happen to his Australian counterpart?