The coronavirus could drag Australian GDP growth close to zero for this quarter, and the situation could get worse before it gets better, according to BetaShares.
The novel coronavirus has already severely impacted global tourism and travel as it rampages through China, and that could have a massive follow-on effect on the Australian economy.
“Australia is also one of the developed economies most exposed to the outbreak, with Chinese inbound tourism estimated at five times more important to the economy than in the case of the US,” said BetaShares chief economist David Bassanese.
“The negative impact on Australia is especially ill-timed, coming in the wake of recent bushfires and a substantial slowdown in private spending.”
Australia is now more exposed to tourism than it was at the height of the SARS pandemic in 2003, which saw visits from Chinese tourists decline by 80 per cent in the three months from February to May.
“Today tourism accounts for around 3 per cent of GDP, of which China accounts for around 20 per cent (or 0.6 per cent of GDP),” said Mr Bassanese.
“So broad calculations suggest a halving of Chinese tourism number over a quarter could directly knock off 0.3 per cent from quarterly GDP growth.”
While more Australians might choose to holiday at home in the wake of the bushfires as part of the ‘empty eskies’ campaign to economically revitalise impacted areas, they are just as likely to divert their holidays to other parts of the world, Mr Bassanese said.
“Of course, assuming the virus is contained within only a few months (as was the case with SARS in 2003), the negative impact on local economic growth should be short-lived, with tourism likely to rebound by the second half of the year,” said Mr Bassanese.
“But Australia faces a difficult growth challenges over the next few months, which suggests the RBA will likely be forced to cut interest rates further – although probably not as early as next week.”