SYDNEY (Reuters) – The hit to Australia’s economy from a viral epidemic spreading from China is likely to be “significant”, Prime Minister Scott Morrison said on Thursday, as the country’s states and territories work out scenarios to gauge the overall impact.
Morrison said the effect of the virus, which has so far killed 563 people in China, will be “a real weight on the economy” as countries impose widespread travel bans. China has been on lockdown for weeks now as authorities battle to contain the spread of the virus.
“We need to be clear about the full extent of the virus and how much further it will spread, the success of containment measures in other jurisdictions, that is not known and that’s why I think a scenario analysis is really important,” Morrison said. “And that’s being done now.”
Two deaths from conronavirus have occurred outside mainland China, but none in Australia, which has confirmed 14 cases of the virus.
Still, many economists have already downgraded their estimates for Australia’s gross domestic product (GDP) growth citing the jolt from coronavirus as well as deadly bushfires in the country’s southeast.
China is Australia’s largest trading partner, taking around a third of its exports while Chinese tourism and students account for about 0.9% of the nation’s A$2 trillion ($1.35 trillion) annual economic output.
Australia’s economy is already in the slow lane with weak consumption and tepid inflation despite three rate cuts by the central bank last year to a record low 0.75%.
On Wednesday, analysts at Australia & New Zealand Banking Group predicted the economy will shrink in the March quarter, the first contraction since 2011.
However, the impact was likely be short-lived.
“While the hit to near-term growth is large, we expect the number of arrivals from China to turn around in Q2, with the rebound in tourism adding to growth in Q3 and Q4,” ANZ said.
“Consequently, the impact on year-end growth is likely to be small.”
Westpac on Thursday rounded down its forecast for Australian output growth for the year to December to 1.9% from 2.1% previously.
(Reporting by Swati Pandey; Editing by Lincoln Feast.)