Australia has signed an in-principle free trade agreement with Britain in what is the first major change to trade rules with the UK since 1973 – but experts tip it won’t alter our economy either way.

Prime Minister Scott Morrison hashed out the deal with British PM Boris Johnson over dinner on Monday and the pair made it official on Tuesday night (Australian time), calling the agreement a win for both nations.

“This is not a standard cookie-cutter agreement,” Mr Morrison said.

“This is an agreement of great ambition for both countries. It shows, I think, a great deal of confidence on the UK’s part as they move into a very different and new era of engaging with free trade.”

Mr Johnson joked that the deal meant “you give us Tim Tams and we give you Penguins, you give us Vegemite and we give you Marmite, we give you Burberry and Mackintoshes and you give us RM Williams Japaras”.

Scott Morrison also met the Queen during his London visit. Photo: AAP

There are growing hopes the free trade deal will drive a major increase in exports to Britain after trade between the two countries plummeted in 1973 when Britain joined the European Union.

But any immediate impact will be relatively small, because Britain is a small trading partner for Australia. These days Asia is more important.

So, what’s in the latest deal?

What we know about the deal

The in-principle agreement itself will be published in the coming days.

The legal documents on a final deal are yet to be signed, but the major details have now been ironed out between negotiators.

A final deal is expected to come into force about 12 months from now.

Wins for Australia

What we know so far is the deal will remove tariffs on Australian beef and lamb exports entirely over the next decade, which is good news for farmers because they’re currently forced to pay more than 50 per cent.

Tariffs on sugar will be progressively axed over eight years and charges on dairy exports will be eliminated over five years.

Tariffs on rice exports will be eliminated immediately when the deal is ratified.

But trade in Australian agricultural goods still won’t be entirely free.

That’s because there will be a cap on tariff-free imports for up to 15 years, which will limit what Australian farmers can sell to Britain without incurring additional charges of up to 20 per cent.

Those measures are designed to protect British farmers, but the caps will be higher than current export quotas:

• The tariff free quota on lamb will rise from 25,000 tonnes to 75,000 over 10 years;
• Beef tariff quotas will rise from 35,000 tonnes to 110,000 tonnes over 10 years;
• The tariff-free quota on sugar will rise by 20,000 tonnes each year for eight years, starting at 80,000 tonnes;
• Dairy tariff quotas will rise from 24,000 tonnes to 48,000 tonnes over five years in equal instalments.

Wins for Britain

Britain has secured tariff reductions on whisky, cars, and a range of commercial equipment and machinery products.

These goods will therefore become cheaper for Australians.

• Tariffs up to 5 per cent on Scottish whisky will be removed
• Tariffs on mining and recycling machinery will be removed
• Tariffs up to 5 per cent on car manufacturers will be removed.

It will also become easier for British people to visit Australia to work.

• Working holiday visa terms will extend from 12 months to three years;
• The age limit on working holiday visas will lift from 30 to 35 years
• A new agricultural work visa will be created across both countries.

A requirement for visitors to spend 88 days working on an Australian farm will also be dumped – a key negotiating request from Britain.

Britain has also managed to secure Australia’s sponsorship in joining the Trans-Pacific Partnership trade agreement.

Did Australia get a good deal?

Independent economist Saul Eslake said Australia shouldn’t have taken anything less than complete tariff and quota-free trade in agricultural goods with Britain, and free movement of people from both nations.

“We should be able to sell our beef, lamb and our wine with basically no impediments at all,” Mr Eslake told The New Daily.

“If there isn’t something pretty close to access across the board, my view is we should walk away.”

What the deal means for the economy

On that measure, Tuesday’s deal could have been better, but either way Mr Eslake doesn’t think it will have a massive impact on the economy.

That’s because Britain is a relatively minor trading partner for Australia these days, while the largest export industries to Britain don’t appear to be covered by the agreement.

For example, Australia’s largest export to Britain is gold, valued at $1.5 billion in 2018, according to the most recent Department of Foreign Affairs and Trade data available. But gold wasn’t mentioned by Mr Morrison on Tuesday.

Agriculture exports, which the deal does cover, were worth just $727 million in 2015 and most of that was wine, according to DFAT data.

But wine was also not mentioned in Tuesday’s announcement.

Beef and veal exports accounted for just $120.5 million and lamb just $100.8 million.

Trade in sugar, rice and dairy products is so small that they are not split into “key agricultural exports” outlined by DFAT.

To put it all in perspective, Australia exported $50.7 billion in agricultural products overseas in 2015, meaning Britain was worth just 1.4 per cent.

There’s also evidence to suggest trade with Britain is already on the rise, with goods and services exports soaring in 2019 to $21.2 billion, up 101 per cent on 2018, according to the latest DFAT data.