Can Brexit make Britain better? For answers, look at what ‘Brentry’ did for Australia
Richard Cullen says lessons can be drawn from the way Australia rebounded from the adverse impact of Britain’s entry into the EU – thanks to major reforms
The claimed consequences of Brexit, good and bad, have been the subject of much debate. In fact, guidance from more than four decades ago on how outcomes may unfold after a major resetting of the macro-economic framework may be drawn from the repercussions of “Brentry”. Britain entered the forerunner to the EU, the European Economic Community, in 1973. That decision was ratified in a UK referendum in 1975.
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At the time of “Brentry”, Australia had a significant manufacturing sector, which made everything from textiles, toasters and motor vehicles to trains and agricultural equipment. This sector operated behind high tariff walls and other protectionist measures. Meanwhile, as a commonwealth country, Australian primary produce enjoyed favourable access to the UK market.
Those preferences were swept aside with “Brentry”. Australian butter exports to the UK plunged by around 90 per cent and apple exports declined by over 60 per cent in the years following 1973. The paramount initial experience of “Brentry” in Australia combined cultural and economic shock with a mood of deep concern about the future.
Successive Australian governments took the right message from ‘Brentry’: this was a harsh but clear signal to reform and move on
These jolts were elemental in driving serious policy change in Canberra. First came across-the-board tariffs cuts of 25 per cent in 1973. Significant tax and other reforms began after 1975. More comprehensive change came after 1983, including tariff cuts, tax reform, floating of the Australian dollar, financial sector reform, and measures to open up the economy to investment and trade.
Since 1990, Australia has seen continuous growth, and the economy has greatly changed. The service sector comprises close to 80 per cent of GDP today, compared to around 60 per cent at the time of “Brentry”, while manufacturing employment has dropped from about 25 per cent to 10 per cent.
Successive Australian governments took the right message from “Brentry”: this was a harsh but clear signal to reform and move on. Australians on the whole responded with flexibility in adapting to these new economic circumstances, repeatedly taking up fresh educational and career opportunities.
Two lessons are clear. First, sovereign independent nations retain flexibility to undertake major policy shifts. Next, strong, clear and effective political leadership is needed.