Scott Morrison has declared the rapidly spreading coronavirus an “unknown global shock” as he stepped away from the government’s pledge to deliver a surplus for the first time in more than a decade.
While dismissing questions about the likelihood of achieving a surplus as “speculation”, the prime minister refused to recommit to bringing the budget back into the black in the May budget, as was forecast in December’s mid-year budget update.
“We will deal with that at the time of the budget,” Morrison said.
“Now when we framed the budget a year ago, hands up those who thought there was going to be a coronavirus epidemic when the budget was released last May? Of course no one did.
“These are unknown global shocks. So we’re dealing with those shocks and we’re processing that through how we look at the budget as we go into May and beyond.”
Morrison said the government would attempt to alleviate some of the economic shocks of the “global health crisis”, which had reverberated through the tourism, education and trade sectors, with a focus on the domestic economy.
However, he warned that the impact on global trade was having a ripple effect on the domestic building and manufacturing industry, amid warnings that supplies from closed Chinese factories may soon run out.
“The world economy has become increasingly interconnected and interdependent over many, many years. And what this impact is is putting up walls and blockages between those connections, between all of these countries. Even without a travel ban, there would have been a significant reduction in the movement of people, as we’re seeing all around the world. That also means the movements of goods and services.”
Morrison warned that the government had “limited” options to prop up the economy through domestic activity.
“The Australian economy will depend a lot more on its domestic elements and it won’t have the same impact from the external components because of the disruption of supply chains and trade impacts and the movement of people,” Morrison said.
“That’s to be expected. But for how long that occurs … that is not clear.”
Morrison said “business-as-usual” could be maintained domestically, but Australia’s economy was now connected globally, with Chinese trade accounting for about 7% of the economy.
The treasurer, Josh Frydenberg, who has just returned from a meeting of global finance ministers in Saudi Arabia, said global growth had been downgraded, but the knock-on effect to the domestic economy was not yet clear.
“Treasury have told me they haven’t finalised their advice on the economic impact of the virus,” Frydenberg said.
He said preliminary work by the International Monetary Fund had indicated that global growth would be downgraded from 3.3% to 3.2% for 2020.
The government has already twice extended a travel ban for Chinese foreign nationals coming to Australia, which is being reviewed on a weekly basis.
But Morrison said the government was not considering extending the ban to other countries where the virus was now affecting significant numbers of people. .
“We have no advice from the medical experts to suggest that that should be done at this point,” he said.