Coronavirus’ Impact on Australia- Feb 2020

The Coronavirus now named COVID-19 has caused quite the ruckus in the international economy. It affects Australia in three central ways.

The first is through its direct domestic impact. Fear around coronavirus has caused a small impact on domestic spending through local consumers being uncomfortable interacting with others. However, this is a small impact compared to the other ways that it has affected Australia.

The second is through a direct effect from China, our largest trading partner where 30% of our exports are sent. Economic growth in China has fallen drastically, with economists from NPR predicting that it would shave up to 2% off GDP growth in the first quarter, or 0.8% off in the calendar year 2020. These impacts stem from China’s drastic measures such as quarantining the entire Hubei Province and extending the Lunar New Year Holidays for 4 days. This combined with general fear within China has resulted in much reduced consumer spending and workers staying home has interrupted supply chains for both domestic and international products. This has drastically reduced commodity prices, and reduced spending on other Australian products hurting the Australian export market. Additionally, the ban of non-Australian residents from China has resulted in large hits to the tourism and education sector. It is particularly problematic as the ban coincides with the peak season for tourism and the start of term for many Australian universities. These hits to Australia’s two largest service sectors are also sizeable.

Thirdly, the outbreak has had a recessive effect on the global economy considering that China comprises 16% of global GDP. Both due to less consumer spending in most nations and the interruption of global supply chains that pass through China. This is also bound to impact Australia, a country that relies on exports for a significant amount of its economic activity.

S&P Global predicted that COVID-19 would shave 0.5% off our annual growth if the outbreak doesn’t worsen. The virus is largely expected to peak in its spread around Late March and wind down by July.



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