As the Morrison government puts together a stimulus package to offset the impact of the coronavirus close, new figures suggest this summer’s bushfires and related thick, choking smoke kept consumers at home.
Pre-dating the outbreak of COVID-19, retail spending dropped 0.3 per cent in January after a downward revised 0.7 per cent slump in December.
Treasury has estimated the bushfires will cut 0.2 percentage points from economic growth in the March quarter, compounded by what could be at least a 0.5 percentage point drag from the impact of the coronavirus.
Prime Minister Scott Morrison said the government is putting its stimulus plan together “swiftly” but not with “undue haste”.
“We have been careful to get this right, to make sure it is targeted, to make sure it is measured, proportionate, and importantly that it is scalable,” Mr Morrison told reporters in Canberra on Friday.
The government is keeping the make-up of its stimulus package close to its chest, including the exact time of its announcement, although Finance Minister Mathias Cormann helpful says it will be “well before” the May budget.
The package is expected to be a multi-billion dollar affair aimed at keeping business doors open and people employed.
Mr Morrison announced he has struck a deal with the states and territories to cover the heath costs from the virus on a 50/50 basis, which at this stage is estimated at $1 billion, with the commonwealth contributing $500 million.
Tourism ministers were meeting in Canberra on Friday to discuss the impact of the virus on the sector.
The government last week added Iran to the ban and South Korean visitors on Thursday. It also introduced enhanced screening for travellers from Italy.
The International Monetary Fund – concluding its annual assessment of Australia – has warned that downside risks to the near-term outlook “remain elevated” and have recently increased due to the COVID-19 outbreak.
“Growth should continue to recover in 2020, but it will take time for the economy to return to potential and restore inflation to within the (two to three per cent) target range,” the Washington-based institution said in a statement overnight.
In the report, the IMF forecasts economic growth rising to two per cent in 2020 from 1.8 per cent in 2019, before rising to 2.4 per cent in 2021.
Australia’s long-term growth average is 2.7 per cent.
However, the annual report was concluded on February 21, and is already looking somewhat dated given world markets have since been extremely volatile as the coronavirus spreads and central banks, including the Reserve Bank, have cut their key interest rates fearing a global downturn.
But Treasurer Josh Frydenberg, responding to the IMF report, believes Australia is approaching the challenges ahead from a position of “economic strength”.