Why Australia shouldn't be Britain's post-Brexit role model

Published date
24 Oct 2017
Australia projects the image of sunny prosperity. The country is a byword for laid back attitudes - and a society in which everyone is entitled to a ‘fair go’. Unfortunately the sun seems to have gone to some people's heads.

In a recent opinion piece, reprinted on Brexit Central, Matthew Lesh, a research fellow at the right wing Institute of Public Affairs, proposed that in looking for a post-Brexit model of economics and immigration policy, Britain can learn from Australia: “an old friend and partner, a country that has achieved over 25 years of economic growth, and has higher incomes and where people have longer lives.”

Lesh claims Australia, “a beacon of Western civilisation on the edge of Asia”, followed the following recipe for success as an independent trading nation:

1. “Free markets, free trade and an open economy are essential to prosperity”

2. “The future is in Asia, not Europe”

3. “A controlled, generous immigration system”

But the argument that free trade and short term visas can take credit for Aussie growth just doesn’t stand up to the cold light of day. 

1. Free markets, free trade and an open economy are essential to prosperity

So far as signing tariff-free trade deals goes, the UK has already done this by becoming part of the EU, the biggest trading block in history.

As an EU member, the UK already far outstrips Australia in terms of openness to trade. According to the World Bank, the UK economy is 10% more open than Australia's.  UK exports of goods and services account for 28% of GDP while in Australia it's less than 19%.

Lesh argues that state interventionism will not work for securing the UK a prosperous post-brexit economy,  "it never has – just as the Venezuelans who face extreme food and energy rationing due to failed socialist policies”. Ah Venezuela, the whipping boy of free trade zealots everywhere.

It's ironic then that he marks the economic reforms of the 1980s as the turning point for Australian economic prosperity. It was the 1983 Hawke Labor Government which brought about economic reform which was only made possible due to the historic ‘accord’ between the Australian Council of Trade Unions (ACTU) and the Australian Labour Party.

The ACTU guaranteed wage restraint in exchange for strong state protections from the opening of the economy – unemployment benefits were expanded, spending on education was increased and high company pension contributions made law. The government also set out plans for various industries – state interventionism in its purest form.      

Australia subsequently experienced a period of socially beneficial growth by marrying economic openness with strong social and redistributive policies, in stark contrast to the UK’s Thatcher years.

Consequently, Australia’s minimum wage is nearly £11 an hour ($18.29) compared to the UKs £7.50. Most people earn far more based on the industry awards scheme, again set by a state body. For example, a retail worker earns here $20.08 (£11.99) per hour, going up to $45.18 (£26.85) for work on a public holiday.

2. “The future is in Asia, not Europe”

The recent spate of free trade deals signed by Australia with Asian countries did not cause the Australian success story, they are too recent to have had any discernible economic impact. Most of them have been highly criticised for their lack of democratic accountability. If Brexit was about taking back control, then secretly negotiated trade deals aren’t what Brexiteers should look toward. 

Many of these deals also lack economic credibility. The Australia-China Free Trade Agreement, or ChAFTA, was heavily lopsided in favour of China. Beijing negotiated better market access and fewer visa restrictions, In the words of one academic observer, “Australia got ChAFTed”.

ChAFTA undermines local jobs by removing requirements for labour market testing and making it easy for corporations to bring exploited, underpaid workers into Australia under secret deals where workers have no right to bargain for wages and can be paid as little as $10 an hour. Again, it’s hard to see Brexiteers or remainers taking succour from a situation like this.

It is also worth remembering that where economic testing is applied to trade deals, the GDP growth predictions are hardly stellar. The World Bank forecast a measly 0.07% GDP growth per year for Australia by joining the Trans Pacific Partnership (TPP), while the EU predicts that the EU-Australia deal will at best lead to 0.2% GDP growth over a 19 year period – a miniscule 0.01%GDP per year. That these growth figures are mere rounding errors confirms that signing bad free trade deals is more about helping big corporations cream more profits than improving the economy and benefiting citizens. 

In any case the idea that the UK can somehow realign the economy toward Asia through free trade deals ignores one of the most fundamental barriers to trade: the ‘tyranny of distance’. By the 1960s Japan had already replaced the UK as Australia’s major trading partner. Australia has realigned its economy to Asia not because “the future is Asian”, but because it sits in Asia’s backyard.

This makes it much easier for the resource-thirsty developing economies of Asia to access Australia’s mines and minerals and agricultural products, as well as send their kids to Australian universities.

3. “A controlled, generous immigration system”

Our current visa system is broken. Increasingly companies are able to bring in non-unionised temporary workers on low rates of pay rather than employ local people. Approximately 10% of the workforce are on temporary visas – not exactly the Brexit dream.

This is especially problematic for young people as companies use this method to avoid training the next generation of workers. This is contributing to high youth unemployment which is over 22% in some parts of the country. 

A recent Australian Senate inquiry found wide-scale exploitation of temporary workers who are often powerless to complain without the risk of losing their sponsorship to work in Australia. Wage theft, forced overtime and poor safety are rife.  

Australia is a more equal society than the UK but many indicators show us converging. Allowing companies to play the visa system and signing bad free trade deals has contributed to rising inequality as well as the cost of living outstripping wage growth. 

As the Vote Leave Campaign made abundantly clear, there are at least 350 million myths perpetuated about Britain leaving the EU every week. Perhaps it is best for Aussie think tanks not to add any more in to the mix without a reality check.