Australian economy to shrink by ‘at least’ 0.5 per cent due to coronavirus: Treasury

Australian economy to shrink by 'at least' 0.5 per cent due to coronavirus: Treasury

“It makes sense for discretionary fiscal actions to be taken in response to significant shocks in the economy,” Dr Kennedy said.

“The recent bushfires, the emergence of the COVID-19 coronavirus and before these most recent shocks the global financial crisis, are examples of shocks that comfortably satisfy the significant criteria.”

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The government is considering stricter travel bans following the first coronavirus death in NSW and more than 3100 deaths worldwide, as authorities struggle to contain the outbreak.

Reducing travel from China to Australia has already had a significant impact on the tourism and education sectors that are reliant on Chinese tourists and students.

“It is now clear the impact of COVID-19 on the economy will be different to SARS. The impact of SARS took on a V shape – a sharp, relatively contained reduction in activity mostly in Asia followed by a quick bounce back,” Dr Kennedy said.

“The economic impact of COVID-19 is likely to be deeper, wider and longer when compared to SARS.”

China, where the outbreak started, is in “contractionary territory”, he said. China is Australia’s biggest trading partner.

“It will create more risk of a prolonged downturn and fiscal support will be needed to accelerate the recovery of the economy, especially once the health and health management effects of COVID-19 start to fade.

“A feature of the COVID-19 shock is that it impacts both supply and demand and has a particular time dimension.”

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