The Implications of Brexit – July 2016
1 Introduction and background
On 27 June 2016, the Prime Minister and the Treasurer wrote to the Reserve Bank Governor, in his capacity as Chairman of the CFR, requesting a report on the implications of the UK's vote of 23 June 2016 to leave the EU (Attachment A).
The vote has generated considerable financial market volatility, economic uncertainty and political instability, particularly in the UK. The UK Prime Minister has resigned and the leader of the UK Labour party has lost a vote of no confidence. It is unclear when the formal process for exit, dependent on the UK triggering Article 50 of the Lisbon Treaty, will begin, let alone the timing and nature of the eventual agreement between the UK and the EU. At the same time, there have been renewed calls for Scottish independence and for similar referendums in some continental European countries.
This report reflects the consolidated view of the CFR agencies: the Reserve Bank of Australia (RBA); the Australian Prudential Regulation Authority (APRA); the Australian Securities and Investments Commission (ASIC); and the Treasury. The report is informed by CFR agencies' close consultation with their respective counterparts in the UK, Europe and other jurisdictions. It takes into account developments up to and including Tuesday 5 July.
The report discusses:
- short-term impacts on the domestic and international financial systems and economies and associated responses by authorities;
- medium- to long-term implications for the domestic and international economic outlook, the future of the EU, international economic cooperation and the financial regulation reform agenda.