ANZ Bank says headwinds from Australia’s bushfire crisis and the coronavirus outbreak in China will likely see the local economy go backwards in early 2020.
“We have revised our preliminary estimate of the impact of the coronavirus and now expect it to take around 0.5 percentage points off Australia’s GDP in the March quarter,” ANZ senior economist Felicity Emmett wrote.
“Along with a small hit from the bushfire impact, we estimate that GDP will now fall 0.1 per cent for the quarter.”
While the RBA looked through the impact of the fires and virus outbreak at its February policy meeting, choosing instead to wait for further clarity, Ms Emmett believes the weak start to the year adds to the case for further policy stimulus.
“For the RBA, a case can be made for looking through the immediate impact on demand, given the likely rebound later in the year,” she said.
“Our view, however, is that while the economic impact of the coronavirus does not drive the case for further easing, it adds to the weak tone in the economy and suggests further rate cuts are likely this year.”