Impact Of The Brexit Party On Australia 's Economy

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Executive Summary This Business Report studies the impact of the Brexit vote in Europe on Australia’s economy. It examines the changes of the economic variables consumption expenditure, government spending, investment and net exports due to the arisen uncertainty by the recent events. Furthermore, an outlook is given on how these variables are expected to change over the next six months. Based on the findings that the economic variables are going to decrease, GDP is anticipated to drop to a lower level accordingly. It is therefore proposed that the Senior Management Team lowers the cash rate in order to facilitate the growth of Australia’s economic variables. Introduction The move of the government of the United Kingdom’s (UK) to vote…show more content…
Uncertainty will subsequently reduce consumer confidence, which is a key indicator for personal expenditure (Lecture 2, 2016). Secondly, Koukoulas states that the retail sector is growing at a level below its potential, which affects consumption negatively. Furthermore, he highlights that Australians are reducing their loan balance, instead of spending it. Connecting the low consumption level to the labor market, Koukoulas points out that the low employment and wage level additionally enhance the reluctant spending behavior (Koukoulas, 2016). Lastly, recent data shows that after the announcement of Brexit around $50 billion value in shares had been lost on the Australian stock market (Thuy Ong, 2016). This has had enormous impact on the existing stock of wealth, which is another key indicator for personal expenditure (Lecture 2, 2016). Consumers are therefore going to spend less and, in turn, overall consumption is expected to decline. In summary, it can be stated that consumption spending has been affected negatively by the Brexit vote and will continue to drop in the next six months, as the causing circumstances are not expected to change in this period. Government Expenditure (G) The effect of Brexit will with no doubt cast problems to the already weakened Australian dollar and cause the government to realign its strategies over the short term unsettled conditions (Yahoo Finance, 2016; Farr, 2016). Figure 1 shows the

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