Australia can't 'lock itself off' from world as $200b wiped from market

Australia is considering further restrictions and quarantine measures on travellers from countries outside China, as the US weighs a South Korean travel ban and the coronavirus smashed $210 billion from the value of the nation's biggest companies.

Australian shares had their largest weekly fall since the global financial crisis after panic selling gripped local and international markets, losing $210 billion in value while new figures showed the federal budget is now $3.7 billion behind the Morrison government's target to produce a surplus.

Prime Minister Scott Morrison.Credit: Alex Ellinghausen

Travel restrictions or quarantine measures could be extended if the virus remains contained to pockets in Italy, South Korea and Iran, but will not be effective if it moves to a true global pandemic.

The government is closely watching the situation in the three countries, where cases have spiked to produce more new infections than in mainland China for the first time since the crisis began in January. New Zealand on Friday announced it would invoke a travel ban for Iran.

Prime Minister Scott Morrison said the suggestion Australia "would be able to completely lock itself off for the world" was unrealistic. He said Border Force was preparing to test tens of thousands of passengers streaming into Australia's airports.

Mr Morrison said the virus "is about 10 times more severe than the flu when it comes to its rate of mortality" and the move into stage two of the emergency plan would prepare Australia in the event of local human-to-human transmission.

Australia has recorded 15 cases out of the more than 83,000 confirmed world-wide, but all have been isolated after returning from overseas to Australia. More than 2850 have died from the disease while 36,571 have recovered.

NSW's Chief Health Officer, Kerry Chant, will meet the heads of NSW's public, Catholic and independent school sectors on Tuesday to discuss contingency plans for schools if the virus hits Australia.

Former deputy prime minister Barnaby Joyce said it was time to also run a security assessment on Parliament in Canberra and the possibility of MPs spreading the virus around the country.

"If we are considering possibly closing schools if required to minimise the spread of the coronavirus, then what of a building where for over an hour a day everyone sits together and at the end of the week travel to every corner of our nation in planes?" he said.

"I'm not saying close down Parliament, but I'm saying we have to do a risk assessment."

Shutting down Parliament would deliver savings for the government, which is now facing the prospect of breaking its election promise of a budget surplus.

Treasurer Josh Frydenberg has forecast a $5 billion budget surplus this year, but analysts have warned the pledge is in trouble with the government conceding the budget is under pressure.

Finance Department figures on Friday showed the budget now $3.7 billion behind expectations with both total liabilities ($1.2 trillion) and net debt ($430 billion) well short of forecasts.

Barnaby Joyce has suggested a possible shutdown of the federal parliament may be necessary because of the coronavirus outbreak.Credit: E+

Receipts alone are down by $4.8 billion on what had been expected to the end of January. Personal income tax collections, which have held up the budget over recent months, were $1.7 billion short of forecasts.

Finance Minister Mathias Cormann cautioned that historically the December and January budget figures were volatile, showing the biggest variations from what had been expected.

In January last year, that variation showed the budget actually $3 billion ahead of expectations. The previous year it was $6.1 billion better off.

The poorer starting position for the budget occurred before serious concerns about the economic impact of the coronavirus outbreak were being recognised by governments and central banks around the world. They also pre-date the introduction of a ban on non-citizens travelling from China to Australia.

The speed of the outbreak's spread over recent days, and clear signs that it is now hitting key parts of the global economic supply chain, has caught policy advisers on the hop.

Last weekend at a meeting of world treasurers and central bankers, the International Monetary Fund estimated economic growth in China would be 0.4 percentage points lower this year due to the virus while global growth would be about 0.1 percentage points lower.

Since then, the number of cases in countries as diverse as Italy and Iran have swelled sharply. Japan overnight closed the school system, raising further fears about the future of the Tokyo Olympics. South Korea is planning a special budget to pump more than $9.5 billion into its economy after more than 2000 cases were confirmed there. Iran cancelled all prayers for the first time in 40 years on Friday.

Private sector analysts in recent days have predicted the virus will have a substantial global impact with some warning if the virus is not controlled within the next month the world may suffer a downturn as large as that experienced in 2009.

Targeted assistance to sectors such as the WA rock lobster industry is being examined by the Morrison government.Credit: Jared Buckingham

The government is looking at possible "modest" and "targeted" assistance, likely aimed at either specific regions, such as Far North Queensland, or particular industries most exposed to the fallout from the virus such as tourism and seafood.

Mr Morrison said the government was looking to help "make a difference" in areas caught up by the virus, noting there were now second-round effects in areas such as restaurants.

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He said Treasury had originally believed the virus would act like the SARS or MERS outbreaks, which had limited economic impacts.

"The Treasury has now said no, this is turning into a very different type of event and that's why we will need to now take a different approach," he said.

Shadow treasurer Jim Chalmers said it was the government that set itself the goal of producing a budget surplus.

"The fires and coronavirus on their own don’t excuse or explain their longstanding failures of economic management which have been obvious for a long time," he said.

The Reserve Bank board meets on Tuesday. Markets started the week putting the chance of an interest rate cut at less than 10 per cent but that has now climbed to one in five.

AMP Capital chief economist Shane Oliver said the RBA's decision was effectively 50-50, noting that if the federal government increased spending to affected sectors it would take months to flow through the economy.

"The RBA is probably not yet convinced of the need to ease on Tuesday, but in the absence of quick fiscal action there is a very strong case to do so," he said.

With Jordan Baker and Rob Harris