Despite the financial turmoil unleashed by the Brexit vote, officials from the Treasury and the Reserve Bank of Australia assured everyone that the economic impact is muted in Asia, where Australia's fortunes are more closely aligned. However, officials acknowledged the risk of financial market contagion and the prospect of ongoing volatility.
"From our point of view, this is a much smaller shock than when Lehman's fell over," one source said.
The Reserve Bank is still seen to have the capacity to support the economy and household spending through additional official interest rate cuts. But with fears of financial contagion, Australia's regulators have taken steps since the 2008 global financial crisis to bolster capital buffers at the big lenders, with the banks themselves having secured enough wholesale mortgage funding to weather the post-Brexit market turmoil.
According to Reserve Bank board member John Edwards, UK's decision would be borne largely by the British and not the rest of the world.
"The UK is not a sufficiently large economy that a setback to growth there will have much influence elsewhere," he said. "It is many, many years since our trade links to the UK were important to our prosperity."
He also expects the volatility to diminish in the coming weeks. "Now that the referendum outcome is clear, there is not much to sustain the volatility," Edwards said.
The real impact of the Brexit vote will depend on the coming weeks as its effect on global commodity prices, the Australian dollar, and the 'animal spirits' of investors and savers will be made known.
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