General economic impact of COVID-19

The coronavirus (COVID-19) outbreak, starting in China and spreading across all corners of the globe, will have a major impact on both the Australian and international markets. Near term growth forecasts by the Reserve Bank of Australia (RBA) sit around 2.75%, and slow growth is expected to continue into 2020.

Low-interest rates are expected to assist with the anticipated pressures that the Australian economy will experience. However, internationally facing markets such as manufacturing, tourism, construction and education are expected to be the hardest hit in the short term.

As China, and Asia in general, are large trading partners for Australia, the effects of the outbreak are already being felt in many sectors as global GDP growth declines. However, it is important to consider there is large uncertainty regarding the duration and the severity of the coronavirus outbreak. If it continues to spread, the impact will be more significant that what is currently projected.

The Commonwealth Government have reacted with a stimulus package estimated between $10 bn and $20 bn, which includes increases in healthcare services, tax relief, wage subsidies, cash payments for businesses, and cash bonuses for welfare recipients. This fiscal injection, combined with monetary easing from the RBA, will soften the blow to Australia’s markets.