“Australian shares benefited initially from the global rebound, but gains were reversed reflecting the greater exposure to China of the Australian economy,” Dr Oliver said.
“The Australian economy is likely to at least see a 0.2-0.3 per cent GDP hit from reduced tourist, education and resources earnings, which taken together with the bushfire impact of around 0.3 per cent, will likely see GDP contract this quarter.”
S&P Global Ratings added to the gloomy mood, warning Chinese economic growth will slow to 5 per cent in 2020, down sharply from 6.1 per cent a year ago.
Given the size of the Chinese economy, it said this will likely have a “material effect on global growth”.
“The global impact will be felt through…sharply reduced tourism revenues, lower exports of consumer and capital goods, lower commodity prices, and industrial supply-chain disruptions,” said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings.
Underlining the real world risks, shares in travel retailer Flight Centre tumbled 2.4 per cent to $39.75 after the company warned the coronavirus outbreak will make it more difficult to achieve its full year profit guidance.
The energy sector was also hit hard by reports of Chinese firms seeking delays to LNG shipments as a result of attempts to prevent the coronavirus from spreading.
Origin Energy, Santos and Woodside Petroleum all slumped more than 1.5 per cent, the largest being Origin which slumped 2 per cent to $7.74.
The iron ore miners were pressured as Tropical Cyclone Damien barrelled its way towards the Pilbara coast, threatening to disrupt mining and port operations across the region.
Fortescue Metals skidded 3.3 per cent to $10.85, BHP 2 per cent to $38.77 wile Rio Tinto fell 0.7 per cent to $98.43.
Despite the soft finish to the trading week, there were some winners on Friday.
News Corporation rallied 3.2 per cent to $21.82 following the release of its quarterly profit report.
Online property services firm REA Group jumped 3.1 per cent to $116.90, closing at a record high. The gains followed the release of the company’s first half profit results.
Retailer Kathmandu also delivered a solid trading update, sending its shares soaring 17.6 per cent to $3.54 to a fresh six-year high.