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Economics & Markets

Which industries will Coronavirus hit hardest?

By Diana Mousina
Economist - Investment Strategy & Dynamic Markets Sydney Australia

We’ll have to wait some time for the full effects of the COVID-19 outbreak to show up in economic indicators, but the anecdotal evidence from local business is giving us a clear indication of the industries which will be worst affected.

Reflecting the fact that the greatest impacts at this stage appear to be the result of containment efforts, rather than the virus itself, the two sectors most exposed to movements of people across our borders appear to be suffering the most.

Worldwide, any business connected with travel and tourism is already feeling the consequences. Although local airlines have not yet been stung as harshly as their counterparts closer to the epicentres of the outbreak, earnings for the Australian aviation sector will come under pressure over the next few months. More broadly, tourism operators are bracing for significant losses, with the impact in Queensland alone already running into the hundreds of millions of dollars, according to that state’s government1.

Meanwhile, almost 100,000 Chinese students enrolled at Australian universities have been unable to re-enter the country to start the academic year2. Over the past decade, the tertiary education sector has become particularly reliant on international students, who account for almost a quarter of revenue at Australian universities3.

The effects of the outbreak on tourism and education alone has the potential to severely dent the growth prospects of the Australian economy over the short term, with the two sectors respectively contributing 3% and 5% of the nation’s output4. Accordingly, GDP growth is likely to fall into negative territory for the first quarter.

The real unknown at the moment is the extent to which the outbreak will affect Australia’s mammoth services sector, as people curtail their movements to avoid exposure to the virus. The overall effects of a largely remote workforce, for example, are untested. Services are currently the key driver of economic growth in Australia5  and their resilience in the face of this challenge will be a critical determinant of the speed at which our economy is able to recover.

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Diana Mousina, Senior Economist
  • Covid-19
  • Economics & Markets
  • Education
  • Opinion
  • Politics
  • SMSF News
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While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

 

This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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