Coronavirus could deliver a $2 billion hit to Australia's economy

02 February 2020 3 min. read

A reduced flow of people from China as a result of the Coronavirus might deal a $2.3 billion blow to the Australian economy, according to a PwC study. The brunt of the economic impact is expected to be felt by the education and small business sectors, as tourists and students remain in China.

As the virus leaves many in China with restricted travel permission, the Big Four accounting and advisory firm looked into the impact that the fast spreading virus could have on Australia’s economy. At the time of writing, nearly 15,000 people in China are infected, with the death toll at over 300.

The travel restriction on Chinese people is set to have a major impact on Australia’s economy. Data from The Australian Bureau of Statistics (ABS) shows that, on average, some 120,000 Chinese tourists travel to Australia each month. And according to government data, there are a staggering 2 million Chinese students in Australia, 1.4 million of whom are enrolled in higher education programmes.

As a result, Australian businesses are starting to feel the brunt, said PwC Australia’s Chief Economist Jeremy Thorpe in discussion with The Sydney Morning Herald. “The small business sector, which makes up a large part of the tourism sector, and the universities are the most exposed from this going on.”

Coronavirus could deliver a $2 billion hit to the economy

According to PwC’s estimates, as many as 20,000 jobs might be affected across the small business and university sectors. Chinese tourists travelling to Australia spend about $9.2 billion annually, which could disappear in whole if the coronavirus threat keeps on throughout the coming year. The country’s GDP could face a $2.3 billion hit over the course of a year. In addition, reduced flow of people might further drive down Chinese investment in Australia, which is already at an eight-year low.

Meanwhile, one case of Coronavirus has already emerged in Australia at the University of New South Wales – the patient is a Chinese student from the Wuhan province. A city of 11 million people, Wuhan is where the outbreak began. The Chinese city has been under lock down since January 23 in an attempt to contain the spread of the coronavirus.

Last week, New Zealand joined a slew of other countries around the world including Australia in barring entry to all foreign nationals arriving from mainland China. Australian and New Zealand citizens and permanent residents returning to the region can still enter the country, as can their immediate family members, but will be required to self-isolate for 14 days on arrival. Similarly, the Chinese government has announced a ban on all outbound (group) travel.

According to Thorpe, the development is worsening an already dampened economic outlook in Australia. “We've had a soft economy, the drought, the bushfires and now this virus. It's bad news on top of bad news,” said Thorpe. Sustained bushfires have already dealt a significant economic blow to Australia, with one analysis predicting that they are costing the Australian economy as much as $50 million per day.