The Australian economy has been weak for a long time, and everyone knows when the immune system is weak then it’s easier for viruses to take hold.
Quarter after quarter of negligible wage growth has developed an aura of uncertainty towards spending and investment – so much so the RBA and their rate reductions can barely keep up.
Then, a fortnight ago, positive if unremarkable unemployment rates had the country feeling healthier, and economists were in agreeance that the RBA’s cash rate could remain steady for the short term. Finally, something to be excited about.
So, the last thing Australia needed was to take another hit.
The Coronavirus has begun to infect the economy, and it’s shining a light on arguably the biggest disadvantage of being a small market. We are largely dictated by the fortunes of the larger economies.
We rely heavily on China for trade and tourism – two sectors which will take an enormous knock over the coming months. Given our reliance on exporting to sustain overall growth, this is sure to have a negative impact on our GDP.
As recently as the September quarter last year, net exports accounted for half of Australia’s gross GDP growth. A sudden fall in such exports has the potential to send our already meagre economic growth spiralling perilously close to negative territory.
Talk of a recession is premature, in my opinion, but the country should definitely brace for the possibility of one, if not two, negative growth quarters.