Australian bank official says virus is an economic unknown

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Reserve Bank of Australia Governor Philip Lowe addresses the National Press Club in Sydney, Wednesday, Feb. 5, 2020. The wildfires will slow growth by 0.2 percentage points in the six months through March, Lowe told the National Press Club. (Joel Carrett/AAP Image via AP)

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February 07 2021 06:00 pm
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CANBERRA, Australia (AP) — Australia’s deadly wildfires will have no impact on the nation’s economic growth this year but the impact of a new virus is still unknown, the head of the Australian central bank said on Wednesday.

The wildfires have killed 33 people and destroyed more than 3,000 homes in the nation’s southeast. The fires will slow growth by 0.2 percentage points in the six months through March, Reserve Bank of Australia Governor Philip Lowe told the National Press Club.

But government reconstruction efforts and insurance payouts would leave annual growth “largely unaffected” by the fires, Lowe said.

Lowe described the new virus, however, as a “new uncertainty affecting the Australian economy.”

The new type of coronavirus has sickened thousands of people and spread to several countries from China, which is Australia’s biggest trading partner. The virus is a cousin to one that caused SARS, or severe acute respiratory syndrome.

“It is too early to tell what the overall impact will be,” Lowe said. “But the SARS outbreak in 2003 may provide a guide.”

In 2003, Chinese growth slowed sharply for a few months due to SARS then bounced back sharply when the outbreak was controlled by China and economic stimulus measures were applied.

But the Chinese economy was now larger than it was in 2003 and more integrated with other economies, including Australia. So the international economic spillover from the new virus could be larger, Lowe said.

Another major factor effecting the Australian economy was an ongoing drought. Drought was expected to reduce farm produce by 10% in the current fiscal year that ends on June 30 and place a 0.25% drag on annual growth.

The bank expects the Australian economy will grow by 2.75% in the current fiscal year and 3% next year.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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