The Australian dollar slipped to US67.6¢ – its lowest level since October 16 – on concerns the economy would be affected by a downturn in China.
Interest rates on government debt fell as investors sought protection from the possible economic impact of the virus. The yield on 10-year Australian Treasury bonds fell below 1 per cent to sit at their lowest level since mid-October. They are now within 10 basis points of their all-time low of 0.86 per cent.
Former treasurer and chairman of the Future Fund Peter Costello said the virus outbreak would have an “obvious negative” impact on the entire economy, particularly regional areas reliant on tourism.
“I think in the short term there’s obviously going to be an effect on tourism to Australia, that will affect airlines, it will affect airports, it will affect general consumption at a time when many tourist industries have also suffered the burden of bushfires, that will have a significant impact in addition to that,” he said.
“We hope the measures that are taken now will contain the virus but it’s still far too early.”
Treasurer Josh Frydenberg said it would take time to determine the fallout from the virus.
“At the current time, it is difficult to quantify what the overall economic impact from the coronavirus outbreak is likely to be,” he said.
The national president and chairman of the Australia China Business Council, David Olsson, said local businesses were already feeling the impact of the virus.
“Our members in live food exports, wine exports and education sectors are reporting business impacts,” Mr Olsson said, describing the effect on these companies as “immediate”.
“But it’s difficult to make any accurate assessments as to long-term business implications until we know more about the virus, and how China and other countries respond.”
Shadow treasurer Jim Chalmers said Australia’s economic challenges went beyond the outbreak of the virus and the recent bushfires.
“In the absence of a plan from the government, our country faces these difficulties and uncertainties from a position of relative economic weakness, not strength,” he said.
The virus outbreak comes on top of the summer’s bushfires, the already soft economy and the ongoing drought.
A survey of chief executive officers by the Australian Industry Group, to be released on Wednesday, shows the nation’s business leaders are already pessimistic about trading conditions for this year.
The survey, carried out before the bushfires swept through NSW and Victoria, found a third of CEOs expected a deterioration in conditions while 26 per cent were tipping an improvement. It is the first time since 2015 that pessimists outnumber optimists.
Industry Group chief executive Innes Willox said the new decade was starting with serious challenges that the bushfire threat had exacerbated.
“Australia’s extraordinary bushfires have further weakened the outlook for 2020. Considerable resources and effort will now need to be directed to recovering lost ground,” he said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.
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