Daily Commentary BY THE CURVE TEAM –

Virus Risks Building

14th of February, 2020

As the Coronavirus spread continues, the risk of a significant flow on effect to economic activity is growing.

With each new day, the latest reports on the spread of Covid-19 see numbers of infections and fatalities grow. While the numbers are still small given the context of the global population, the interconnectedness of the global economy and mobility of citizens means it poses significant risks if the spread continues.

So far the impact has largely been on supply chains with some restrictions on the movement of goods and people. However, the longer the situation continues, the bigger the threat as measures to contain it intensify.

We have already seen travel bans on people coming from China in to Australia and shipping vessels coming from China unable to dock in local ports. These short-term measures are up for review in the coming days and if they are extended as is expected, will have a growing impact on the local economy.

There is every likelihood that the impact of the virus could be short lived. That doesn’t mean that some of the more severe scenarios that are being discussed by the World Health Association can’t be completely discounted.

At the core, it is largely unknown as to where the situation will finish up. That means that we face considerable uncertainty and that in itself poses a risk along with the growing flow on effects from countermeasures to contain the virus. This is one reason why markets aren’t convinced that the RBA’s easing cycle is over.

David Flanagan

Director - Interest Rate Markets