Coronavirus economic impact: Australia could be among world's hardest hit nations

Australia’s economy is unusually dependent on China, and a coronavirus-driven slowdown could mean billions in lost revenue

di Martin Farrer

Australia could be one of the countries worst affected by the economic impact of the coronavirus outbreak as factories in China remain shuttered and millions of people are confined to their homes and banned from travelling.

The Reserve Bank of Australia on Friday stuck to its forecast of strong growth this year thanks to a rising housing market, and the stock market – along with others around the world – has largely shrugged off concerns about the global impact of the virus to remain close to all-time highs.

But evidence is mounting that China is suffering a significant slowdown. S&P has downgraded its growth forecast for the world’s second biggest economy to 5% this year from 5.75%, predicting that the impact would spread around the world, while it seems clear that China’s lockdown is set to deprive Australia of billions of dollars in revenue from big spending tourists and students.

The standstill, typified by Toyota’s announcement on Friday that it is keeping its 12 factories in China shut for another week, is alarming investors such as Damien Klassen, who manages millions of dollars for Melbourne-based Nucleus Wealth.

“When you look at how this will affect other countries, what their exposure is to China, how big the economy is, what type of companies it has, then Australia ticks a lot of the boxes,” he said. “In terms of which countries will be most affected, we’re right up there.”

Alex Joiner, economist at IFM Investors in Melbourne, also sees a growing risk for Australia despite the optimistic forecasts from the RBA governor, Phillip Lowe, that the economy will expand by 2.75% this year.

The threat from the Chinese lockdown to tourism alone is very significant, Joiner says. China provides around 15-16% of visitors to Australia but they are the biggest contributors to the Australian bottom line when they are here, outspending American tourists by a ratio of three to one. Their spending of $12-16bn is greater than American, British, Japanese and New Zealand tourists put together.

Continua la lettura su The Guardian