Coronavirus: travel bans set to knock $6bn from economy

Banks predict the coronavirus crisis will wipe $6bn off Australia’s GDP and result in a first 2020 quarter of negative growth.

Group of Eight chief executive Vicki Thomson. Picture: Nikki Short

Australia’s sandstone universities are “unfortunately” preparing for Scott Morrison to extend a ban on foreign nationals coming from China, as banks predict the coronavirus crisis could wipe $6bn off Australia’s GDP and result in a quarter of negative growth.

The national security committee of cabinet will decide as early as Thursday whether to extend the 14-day travel ban as deaths from the disease reach more than 1100, with businesses­ warning an extension could compound the damage ­already done to retailers and the tourism industry.

Group of Eight chief executive Vicki Thomson told The Aust­ralian on Wednesday that while the nation’s top eight universities were awaiting an ­extension on the ban, their focus remained on helping the 98,000 students stranded outside­ the country.

“If the ban is extended, our ­universities are committed to ensurin­g they can minimise study disruption for the tens of thousands of students caught within China, and in some cases other third countries,” she said.

“There is no doubt that as the global coronavirus emergency continues … it is delivering a significan­t financial blow … our first and foremost priority is to our 98,000 Chinese students who are unable to arrive in Australia.”

The Go8 represents tertiary education institutions including the University of Melbourne, University of Sydney and Aust­ralian National University.

Credit rating agency S&P ­Global warned last week that universities could lose up to $2bn in fees if Chinese students stranded by the coronavirus travel ban were unable to reach Australia in time for the academic year.

It also warned there would be other economic damage from the loss of student spending, as the $2bn estimate did not include “the broader economic contribution (that stud­ents make) to accommodation, tourism and the domestic consumption of goods and services”.

Businesses are also feeling the strain, with major retailers experiencing ­delays on hi-tech stocks, while the China-to-Australia tourism market — which contributes $711m a week to the economy — has also taken a massive hit.

Josh Frydenberg told The Australian that, despite business concerns­ about the fiscal impacts of coronavirus, the “economy remain­s remarkably resilient.

“The RBA governor has also pointed out that ‘it is too early to determine how long-lasting the impact will be’ from the corona­virus,” the Treasurer said.

“Australia is in a strong positio­n to respond to the challenges we face, as responsible budget management has given us the ability to respond to economic shocks without increasing taxes or cutting essential services.”

UBS economist George Thar­en­ou said the investment giant had downgraded Australia’s growth projections, arguing that the contraction could be “severe”.

“UBS China’s economics team expects a 30 per cent slump in China’s total outbound travel in 2020, with the Q1 contraction more severe,” he said.

“So a 30 per cent fall for Australian services exports to China wipes $6bn from GDP, or 0.9 per cent off annual growth, a plausible downside risk scenario.

“Given Australian quarter-to-quarter GDP has been rising by only $2.5bn … we now think Q1 GDP growth is likely to be negative, even with arguably still optim­istic assumptions.”

NAB joined ANZ in predicting a quarter of negative growth, which NAB chief economist Alan Oster said was due to the double blow of bushfires and coronavirus.

“We now expect a small negative for Q1 2020 growth. Much of that will come from weaker ­consumption and a hit to tourism, education, commodity prices and incomes,” Mr Oster said on ­Wednesday.