Australian Markets Weekly: Travel ban points to larger coronavirus impact on Australian GDP

The government has introduced travel restrictions on arrivals from mainland China and advised Australians to avoid travelling to China because of the novel coronavirus.

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For the full picture, download the report: Australian Markets Weekly 3 February 2020

  • The government has introduced travel restrictions on arrivals from mainland China and advised Australians to avoid travelling to China because of the novel coronavirus.
  • Chinese tourism and students account for about 0.9% of Australia’s GDP.  Assuming the travel ban lasts, say, two months, the disruptions would take 0.15% off Q1 GDP, adding to the temporary effect of the bushfires, which we initially put at 0.4%.
  • Note that disruptions could extend past two months, while there could be a spillover to tourism from the rest of Asia, as was the case during the nine-month long SARS outbreak in 2003.

The week ahead – RBA on hold, Governor speech/testimony & updated outlook; coronavirus uncertainty

  • AU and NZ. The RBA’s first meeting of the year is expected to see the bank keep the cash rate at 0.75%, although the RBA is expected to downgrade its growth forecasts in its quarterly statement on Friday. Governor Lowe will outline the RBA’s outlook for 2020 in a speech on Wednesday entitled “The Year Ahead”.  A parliamentary testimony on Friday will likely see the governor defend the bank’s slow progress towards its goals. Q4 real retail sales on Thursday are expected to be unchanged after contracting in Q3.  Wednesday’s Q4 NZ labour data is expected to see unemployment steady at 4.2%.
  • Global. The focus remains on the coronavirus, where more countries are restricting travel with China. In the US, the 2020 election year kicks off with the Iowa caucuses; recent polling shows Sanders pulling slightly ahead of Biden for the Democratic nomination. Key US data are scheduled for the week payrolls is expected to see steady unemployment of 3.5% and jobs to rise 148k, while the ISMs are expected to show modest improvement.

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