No lasting global Brexit impact: RBA’s Edwards

Brexit pain will be borne by Britain, not the world, says Reserve Bank board member John Edwards.

Mr Edwards said Brexit was a “very bad and misinformed decision for the UK.” Picture: AP.

Britain’s vote to leave the European Union won’t have a lasting impact on global financial markets and interest rates, said John Edwards, a member of the Australian central bank’s policy-setting board, Friday.

In an email to The Wall Street Journal, Mr Edwards said it was a “very bad and misinformed decision for the UK,” that could see years of weaker UK growth because of uncertainty over investment, and especially over the future of London as a financial center.

“But I also think most of the pain and difficulty in this decision will be borne by the UK and not by the rest of the world,” said Mr Edwards, an economist whose term with the Reserve Bank of Australia ends next month. “The UK is not a sufficiently large economy that a setback to growth there will have much influence elsewhere.”

Mr Edwards added that even prolonged negotiations over the UK’s exit from the EU, or a long leadership crisis, shouldn’t affect trade, investment or output across the remainder of the EU, China, the U.S. or Japan.

With all voting areas counted, Leave beat Remain 51.9 per cent to 48.1 per cent early on Friday, severing the UK’s ties with the EU after 43 years. The results instantly reshaped Britain’s political scene, as UK Prime Minister David Cameron, who led the “remain” effort, announced his intention to step down.

Mr Edwards said he expected the global financial market effects to diminish in coming weeks.

“Now that the referendum outcome is clear there is not much to sustain the volatility,” he said. “There is nothing much to affect global interest rates in any sustained way, or the pattern of global exchange rates other than the British pound.”

The pound fell more than 10 per cent to its lowest point since 1985 and the outcome triggered steep drops in stock markets and a flight into safe assets such as bonds and gold.

with Rachel Pannett

Wall Street Journal