How Have the Bushfires and Coronavirus Impacted Australian Economy
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Impact of Bushfire and Coronavirus on the Australian Economy

Updated on April 20, 2020 01:36 pm
Aus Economy

On December 31, 2019, when the Chinese government alerted the world about the outbreak of an infectious respiratory illness, Australia was in the midst of the most devastating bush-fire on record. The bush-fire which erupted in New South Wales since September 2019 burned roughly 25.5 million acres of land, destroyed thousands of homes, and properties and left at least 33 people dead. On February 13th, the fires were finally declared “contained.” The rebuilding efforts after such a disaster were to take months.

By late January 2020, the coronavirus outbreak had already killed dozens of people in China and thousands had been infected. New cases had already been detected in Vietnam, South Korea, the United States, Singapore, and Japan. On 25th January, Australia reported its first case of coronavirus in the state of Victoria. 

The infected person was a Chinese citizen who came to Australia from the city of Wuhan - China, the epicenter of the outbreak. As of writing this article, there are 6494 confirmed cases and 61 deaths in Australia. The total coronavirus death toll worldwide is 120,450 and total confirmed cases are over 1,929,900.  

Australia economy after bush-fires

Experts have pointed out that the scale of the damage of the wildfires is so large that the cost is going to be an unprecedented amount. Back in 2009, the Black Saturday blazes cost $4.4 billion as per Moody’s Analytics. However, given that this season’s Australian bushfires have burnt land 25 times more, the loss is considerably high. 

Most analysts believe that the economic cost could range from $4.56 billion to almost $19 billion. Also, there are damages to wildlife, habitats, and also smoke-related health concerns like heart and lung diseases. By the first week of January, the Insurance Council of Australia recorded 8,985 insurance claims and the bill surpassed $700 million. The number is much higher as the fire continued to burn till mid-February.

Sectors worst hit by the fires


Around 19,000 farmers were affected by the fires. The fires decimated farms and killed thousands of livestock, particularly sheep and cattle. Damage to crops and dairy products led to increased prices of fruits, vegetables, and milk. 


The fires had a massive impact on the tourism industry since it occurred during the peak holiday season. It was estimated that the industry faced losses of $4.5 billion. Domestic tourism was severely affected and international travelers significantly decreased due to safety concerns. Rebuilding the damage cost millions of dollars.  


The retail sector suffered heavy losses as people lost jobs, stayed indoors, avoided outdoor activities and stopped going to work due to air pollution, smoke, and uncertainty around safety issues. Household spending plummeted and businesses had to downgrade profits. 

Coronavirus impact on the Australian economy

The coronavirus outbreak worsened the dire Australian economic situation caused by the bushfires. An analysis by the UN Department of Economic and Social Affairs said the global economy could shrink by 1 percent in 2020 due to the coronavirus pandemic from the previous forecast of 2.5 percent economic growth rate. It may even contract even further as the lockdown measures extend to restricting economic activities on a global scale. International trade and global supply chains have been severely disrupted. 

The quarantine measures that were imposed in China in the initial stage of the coronavirus outbreak, halted manufacturing activities due to the shutting down of factories in China. This had a ripple effect all across the globe due to the disruption in the supply chain. Since China happens to be Australia’s biggest trading partner, the impact was more pronounced. The shut down in China had a direct effect on the Australian GDP growth rate. 

The lockdown measures undertaken to curb the spread of the virus led to job loss in thousands as restaurants, cafes, airlines remain closed due to lack of customers. The social distancing measures seem to slow down the spread but the shut down of businesses is economically very costly. Economists predict that the effect on economic growth will extend even to the second quarter of the year.

Three sectors largely impacted by the coronavirus


Aus Exports

China is one of the biggest consumers of Australia exports such as iron ore, coal, liquefied natural gas and energy products. In December 2019, $9.1 billion worth of merchandise was exported to China as per the data compiled by the Australian Bureau of Statistics. As the factories in China remain inactive, the demand for such exports has declined tremendously. 


The imposed travel ban had an immediate effect on the tourism industry. Australia had about 8.66 million visitors in the 12 months that ended in September 2019. Of these, the total number of Chinese tourists were 1.33 million who spent 27% of the $45 billion visitors expenditure. The disruption in the number of tourists is a lost demand as it doesn’t generally bounce back in the year ahead.


The Australian government had banned the entry of non-resident foreigners, especially from China following the outbreak. Top Australian universities will have to face the immediate credit risks as Chinese students constitute about 60% of the international student population at these institutions. The contribution of the Chinese students to Australia makes up around 0.6 percent of GDP in total. Reduced enrollments and exchange programs will lead to low revenue and cash reserves. 

Rise of Contactless Payments due to coronavirus outbreak

As countries around the world are adopting measures to sterilize the banknotes due to the fear of contamination, there has been a rise in contactless payment. The month of March alone experienced a total of two million transactions using one of the digital payment methods. Commonwealth Bank of Australia recorded a $1 billion in digital wallet transactions in March. The high risk of getting infected from notes and coins has prompted the use of contactless payments.

Government Measures to Save the Economy

Prime Minister Scott Morrison planned to inject $11.4 billion into the economy to prevent the looming recession due to the coronavirus pandemic. The stimulus package will financially support 120,000 apprentices, provide welfare recipients one-off cash payments and support small businesses by offering payment up to $16,160. More than 6 million welfare recipients will receive a one-off cash payment of $750 starting from March 31, 2020. 

As the outbreak showed no signs of slowing down, stringent lockdown procedures have been adopted by many countries. Since the last announcement of the stimulus package, the economic conditions have further deteriorated. On March 30, the Australian government came up with $130 billion Job Keeper Payment to help retain the jobs of the people as the officials deal with the economic effects of the coronavirus. The total support to the economy by the government is projected to be $320 billion across the forward estimates.

Government economic response is focused on supporting the individuals and households and helping businesses by providing loans to facilitate necessary cash flows during the uncertain economic outlook. 

What about the immigrants?

Prime Minister Scott Morrison told immigrants with a student and temporary visas they should “return to their home countries” if they were unable to support themselves in Australia. Australia is a migrant nation and excluding international students and migrant workers from emergency economic measures are not the right signal. To fill the gap, universities and non-profit organizations have stepped up. ANU, Charles Darwin University, and Melbourne University are among several institutions to have created emergency relief funds for students.

Also, read -

Why is sending money to India from Australia expensive?

Must Read Before Sending Money from Australia to the Philippines.

Australia’s economic recovery 

Before the pandemic, Australia was on its way to enter its 28th year of uninterrupted annual economic growth.  Australia is the only major developed economy to have recorded no annual recessions from 1992 to 2018, surviving the 1997 Asian financial crisis, the bubble, and the recession during the 2007-2008 financial crisis. The road to economic recovery is unclear in the short term. The global outlook report by the International Monetary fund predicted Australia’s economy would shrink by 6.7% this year and rebound in 2021. Other major investment banks are also optimistic about the Australian economic outlook despite the grim scenario.

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