How COVID-19 affected the Australian economy // Michail Petrov – Eco 2

China has become an irreplaceable part of the global economy ever since the SARS outbreak in 2003. It has grown into a massive factory, producing millions of products including Nike apparel and Apple products. The country accounts for 24% of total trade in Australia and holds hundreds of millions of wealthy consumers who spend big on luxury products, tourism and education. Chinese tourists and international students spend more at Australian retailers than other nationalities, meaning that the government’s ongoing travel ban will greatly damage the sectors. To the untrained eye, this may seem like a bad thing for China’s economy, but in truth, the Australian economy is correlated with the Chinese.

The most direct hit that Australia will get is from the impact on tourism and education, it is expected to take 0.5* percentage points off growth in the first quarter. Philip Lowe, the reserve bank boss told ABC News that travel restrictions could cut, in a worst-case scenario, $6 billion to $8 billion from tourism and education exports in the first half of the year.

Earlier in January, the first wave of economic disruption hit countries worldwide, including Australia. Some of the businesses that were affected were airports, airlines, hotels and educational institutions. Now that we are mid February, many factories in China remain closed, the virus is having a second wave of economic chaos which disrupts business supply chains and hurts revenue.

Australian Companies that rely on stock from china are already feeling the impact, JB Hi-Fi is already predicting stock shortages in the next 4-6 weeks. These statistics really make you question the stability of the Australian Economy, what if this goes on for a year? How will major retailers cope with the pressure from the Australian consumers? In the end, how much of a threat does the Coronavirus present towards the Australian economy? At this stage, it’s too early to tell but even in the early stages of the virus Australia is beginning to suffer the economic impact. In my opinion, Australia has essentially put all “Eggs into one basket” instead of diversifying and trading evenly with other countries, we have become too reliant on China to prosper and now, after only 2 months since the beginning of the Coronavirus, the consequences are beginning to show up.

By Michail Petrov