The Australian economy is becoming infected by the coronavirus. Primarily, because Australia relies heavily on the Chinese to inject money through tourism, educational fees and export revenue. To add insult to injury, the coronavirus could impact the housing market as early as 2021 if our strict travel restrictions continue.
Let us discuss how the coronavirus is impacting tourism, education, export revenue and property market in Australia.
Australia’s tourism market is well led by the Chinese and evidently, the Chinese tourists are dropping due to the travel restrictions. In turn, the Australian economy could suffer a significant revenue loss.
Price Waterhouse Cooper supports this claim as their analysis predicts the Australian economy could lose a total of $2.3 billion in revenue from Chinese tourists.
2) Tuition fees
According to the DG Institute, 100,000 Chinese students were planned to commence studying in Australia early this year. However, the current travel restrictions in Australia resulted in not even 1 of 100,000 students flying over to study. To understand, the significant impact of the coronavirus on education and thus the Australian economy lets us do a simple calculation.
International students pay roughly a 40,000 upfront fee to study at Australian universities. 100,000 Chinese students x $40,000 = $4 billion in tuition revenue. Meaning the coronavirus is causing the Australian government to not receive a budgeted $4 billion in revenue.
3) Export revenue
China is Australia’s largest export market. Back in 2019 Chinese exports generated $93 billion in annual revenue for the Australian economy. According to the Australian Financial Review “The Australian export market is likely to slow as the trade restrictions surrounding the coronavirus continue to cause problems”. In turn, the demand for Australia’s commodity exports, such as coal and iron ore will feel the impact.
4) Property Market
If the coronavirus continues to infect the Australian economy the property market could become a potential victim by 2021. The effects on the property market include:
- The reduction in Chinese students coming to Australia. Resulting in less demand for rental accommodation (investment property).
- The reduction in Chinese investors coming to Australia to purchase in the local property market and/or investment properties.
- The Chinese government wants to restrict the funds going out of their country to protect their economy. In turn, Chinese investors are limited to buying a property only in China. Meaning the revenue in the Australian property market will decline.
Furthermore, Tim Reardon, Chief Economist of the Housing Industry Association”, stated Household expenditure is a weakness in the economy”. “The restriction (What restriction be specific) is unlikely to directly impact demand,” and “depending on the length and depth of those restrictions, it may impact the housing market in 2021 in terms of demand
In summary, the virus does not pose an immediate effect. Instead in the long term the coronavirus, through a potential rise in unemployment, will weaken and slow household spending.
Here is our free, uncomplicated, and extensive ASX portfolio
Here are some of Youth Investment Group’s best articles:
• How investing 40k in Tesla at IPO would make you a millionaire or
• Why a company invested 28 million into PointsBet Holdings?
• Will 2020 drive cannabis growth or continue the bearish trend?
If you enjoy our articles or are wanting to learn more, you can subscribe to us for free via email and get updates when we post new articles. From all of us at YIG, thank you for the support.
The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Thomas He, Associate of YIG.