Australia's peak business body says uncertainty and market volatility from the shock Brexit vote is likely to continue for months.
Australian companies and investors have played down the impact of Britain's vote to leave the European Union but fears of the financial consequences of Brexit remain as uncertainty grips world markets.
Business Council of Australia chief executive Jennifer Westacott said global uncertainty reinforced the need for "consistent policy settings" that would allow Australia to retain its AAA credit rating.
"While the underlying fundamentals of Australia's financial system remain strong, we are seeing some volatility and uncertainty in financial markets," Ms Westacott said on Monday.
"This can be expected to continue over coming months."
After the Australian share market suffered a 167-point fall last Friday - its biggest one-day loss in nine months - local shares recovered some ground on Monday.
The benchmark S&P/ASX200 gained 24 points or 0.5 per cent to close at 5137.2.
AMP Capital chief economist Shane Oliver said Brexit was unlikely to have a major economic impact on Australia.
"Given that only 2.7 per cent of Australian exports go to the UK and the `Leave' victory is unlikely to plunge Europe into an immediate recession, the main impact on Australia will be on financial markets," Dr Oliver said.
He expects the uncertainty in global financial markets to disturb short-term confidence and bolster the case for the Reserve Bank to cut interest rates.
The leave vote barely changes Australia's low risk of recession, he said.
However, advisory firm KPMG estimates the Australian economy will shrink by at least one per cent as the UK transitions out of the EU.
"The implications for Australia are still being worked through, but any impact will be felt via our trade accounts," KPMG said, adding that the worst case scenario for Australia is for a 1.4 per cent decline in GDP.
And Australia's banking sector could be hit if short-term lending markets dry up.
"Banks around the world rely on short-term funding. If those markets freeze, then there is an effective bank run," UNSW Business School's Professor Richard Holden said.
"Worryingly, Australian banks rely more on short-term funding than almost any in the world."
The financial sector was the worst performing on the Australian stock market on Monday, with banks and insurers trading below the benchmark S&P/ASX200 index.
Companies including Henderson Group, Clydesdale Bank and QBE - all of whom have direct exposure to the UK and Europe - fell sharply in value.
The Australian tourism industry could be affected, with the International Air Transport Association expecting UK air traveller numbers to decline by between three and five per cent by 2020.
That's because of the expected downturn in economic activity and the fall in the value of the British pound against other currencies.
UK visitor arrivals to Australia were up 5.7 per cent to 704,300 for the year to April, with spending up 10 per cent to $3.9 billion over roughly the same period.
"Until we start to see the full impact of this decision on the British economy, it's impossible to really predict what knock on effect there may be on outbound travel from the UK to Australia," Tourism Australia spokesman Leo Seaton said.
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