Reserve Bank of Australia expects coronavirus to weaken the economy, be worse than SARS

How coronavirus could crush Australia’s already fragile economy as experts say it will be worse than any previous outbreaks

  • The Reserve Bank of Australia discussed coronavirus at its February meeting
  • It is expecting COVID-19 to be worse for economy than the 2003 SARS outbreak
  • RBA is also expecting coronavirus, bushfires to weaken economy in near term 
  • Apple has announced it would cut back on iPhone production in central China 

The coronavirus is expected to hit Australia’s already fragile economy and be worse than previous Chinese disease outbreaks.

With 15 Australians now diagnosed with the flu-like illness, there are fears the COVID-19 scare could turn into a pandemic. 

American tech giant Apple has also announced iPhone production in China was likely to be ‘constrained’, sparking a global shortage of smart phones. 

A fortnight after the first cases were revealed, the Reserve Bank of Australia discussed the possible effects on the economy at its first board meeting for 2020, held in early February.

‘Members discussed the coronavirus outbreak, noting that it was a new source of uncertainty for the global economy,’ the central bank minutes released on Tuesday said. 

 

The Reserve Bank is expecting the coronavirus to hit the economy and be worse for Australia than previous disease outbreaks that originated in China. Pictured are passengers wearing protective face masks at Brisbane International Airport in January 

‘It was too early to determine the extent to which growth in China would be affected or the nature of the international spillovers.’

The central bank this month left interest rates on hold at a record-low of 0.75 per cent but forecast Australia’s already weak economic growth pace would be even ‘weaker in the near term’ from the effects of the summer bushfires and the coronavirus.

The RBA is expecting coronavirus to be worse than the 2003 outbreak of SARS, also known as Severe Acute Respiratory Syndrome.

Unlike 17 years ago, China is now Australia’s biggest trading partner and an even bigger buyer of Australian iron ore, coal and university education.

‘China now accounted for a much larger share of the global economy and was more closely integrated, including with Australia, than in 2003 at the time of the SARS outbreak,’ the RBA said.

‘The economic effects would depend crucially on the persistence of the outbreak and measures taken to contain its spread.’

The coronavirus is already affecting global manufacturing output with Apple announcing it had cut back iPhone production in China. Pictured is a stock image of women using an iPhone

The coronavirus is already affecting global manufacturing output with Apple announcing it had cut back iPhone production in China. Pictured is a stock image of women using an iPhone

The coronavirus is already affecting global manufacturing output with Apple announcing it had cut back iPhone production in China.

‘Worldwide iPhone supply will be temporarily constrained,’ it said in an investor update this week.

‘These iPhone supply shortages will temporarily affect revenues worldwide.’

Apple iPhones are mainly produced at Shenzhen, north of Kong Hong.

They are not made in central China’s Hubei province, which contains the city of Wuhan, where the coronavirus outbreak originated in January.

Apple, nonetheless, expected iPhone production to slow as Chinese demand for its products fell. 

Earlier this month, Qantas suspended direct flights from Sydney to Beijing and Shanghai until March 29.

China was last year Australia’s fifth most popular overseas destination, with 608,000 trips made there in 2019, Australian Bureau of Statistics data released on Tuesday showed. 

Australians spent an average of 17 days there during their visit.

This week, Prime Minister Scott Morrison announced foreign nationals who had visited China would be banned from entering Australia for another week, from February 15.

In July 2003, just four months after SARS reached Hong Kong, Australia’s Treasury department described the outbreak as something that would only ‘have a mild and temporary impact on the Australian economy’.

AUSTRALIANS WITH THE CORONAVIRUS

NEW SOUTH WALES: 4 

January 25

  • Three men aged 43, 53, and 35 who had recently travelled to China are confirmed to have contracted the disease.
  • Two flew in from Wuhan while the other arrived in Sydney from Shenzhen, south China.
  • They are being treated in isolation at Westmead Hospital and are in stable condition.

January 27 

  • A 21-year-old woman is identified as the fourth person to test positive for the illness in NSW.
  • The woman, a student at UNSW, flew into Sydney International Airport on flight MU749 on January 23 and presented to the emergency department 24 hours later after developing flu-like symptoms.
  • She is being treated in isolation at Westmead Hospital.

VICTORIA: 4

January 25

  • A Chinese national aged in his 50s becomes the first confirmed case of the coronavirus in Australia.
  • The man flew to Melbourne on China Southern flight CZ321 from Wuhan via Guangzhou on January 19.
  • He is now in quarantined isolation at Monash Hospital in Clayton in Melbourne’s east.

January 29

  • A Victorian man in his 60s is diagnosed with the coronavirus.
  • He became unwell on January 23 – two days after returning from the Chinese city of Wuhan, the epicentre of the outbreak. 
  •  The man was confirmed as positive on January 29 and was subsequently seen by doctors at the Monash Medical Centre. He was assessed as being well enough to stay at home.

January 30

  • A woman in her 40s is found to have coronavirus. 
  •  She was visiting from China and mostly spent time with her family.
  • She is being treated at Royal Melbourne Hospital.          

February 1

  • A woman in her 20s in Melbourne is found to have the virus

 QUEENSLAND: 5

January 29

  • Queensland confirms its first case after a 44-year-old Chinese national wass diagnosed with the virus.
  • He is being treated at Gold Coast University Hospital.

January 30

  • A 42-year-old Chinese woman who was travelling in the same Wuhan tour group as the 44-year-old man tests positive. She is in Gold Coast University Hospital in stable condition.  

February 4

  • An eight-year-old boy has been diagnosed coronavirus. He is also from the tour group where the other Queensland cases came from    

February 5  

  • The case was found in a 37-year-old man, who was a member of a group of nine Chinese tourists in quarantine on the Gold Coast

February 6

  • A 37-year-old woman has been diagnosed with coronavirus from the same travel group that flew to Queensland from Melbourne on January 27

SOUTH AUSTRALIA: 2

February 1

  • A Chinese couple in their 60s who arrived in Adelaide from Wuhan to visit relatives are confirmed to have coronavirus.

CHINA: 2

January 30

  • Two Australians have been confirmed as having the virus in Wuhan itself. Australia has raised the travel alert level to ‘do not travel’ for the city of Wuhan – the epicentre of the outbreak – and for the entire Hubei province.
  • Chief Medical Officer Brendan Murphy says unless people have contact with someone who is unwell and has come from that part of China, there is no need for current concern. 

JAPAN: 15    

  • As of February 15, 15 Australians are among 219 confirmed cases of the coronavirus contracted on board Diamond Princess cruise ship at Yokohama.

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