While it’s too early to know the full potential impact of coronavirus 2019-nCoV, it is clearly another negative for the economy, on top of the catastrophic bushfires. While there’s some comparison to SARS in 2003, the economic link between Australia and China is multiples larger now. In 2003, Australian exports to China were only $11bn or 7% of the total (or 1.3% of GDP), but are now $152bn or 32% of exports (7.8% of GDP). The potential impact could now be much more significant.
With the Chinese Government recently announcing a halt on all outbound group tours for a minimum of two months, tourism/travel could be a key sector impacted. In 2003, short-term arrivals from China were only 200k p.a. or ~7% share, but are now ~1.5mn or ~19%. Indeed, by value, Chinese visitors are ~30% (~$20bn) of total inbound tourism. We estimate that ~17% (~$3.3bn) of this spending is from group tours. Given Feb & March are two of the busiest months for Chinese travellers to Australia (~¼ of annual arrivals) we estimate the cost from the halt could be at least $1bn. However, if travel disruptions are extended, or expand to cover independent travellers, the cost could be much greater.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
