Treasurer and RBA split on virus fallout

Treasurer Josh Frydenberg won't say if the economy is strong enough to deliver a budget surplus.
Treasurer Josh Frydenberg won't say if the economy is strong enough to deliver a budget surplus.

Treasurer Josh Frydenberg says the impact of coronavirus on the Australian economy will be significant, despite a Reserve Bank forecast that growth will be largely unaffected.

Mr Frydenberg is refusing to say whether the economy is still on track to record a budget surplus.

"We're working with those industries affected ... to try to mitigate the impact that the spread of the coronavirus is having on the economy," he told reporters in Canberra on Thursday.

But the treasurer said the impact on the economy would undoubtedly be significant because of China's role within Australian markets.

He said China represented the biggest cohort of international students at more than 200,000, while the country also brought in 1.4 million tourists and about a third of trade.

"We don't know how severe and sustained the spread of the coronavirus will be, we know that the impact on the economy will be significant but what we are doing is ensuring we have the flexibility to respond as required," he said.

His assessment comes after Reserve Bank Governor Philip Lowe said Australia's economic fundamentals "remain very strong" despite the coronavirus outbreak.

"They provide a solid foundation for us to be optimistic about our future," Dr Lowe said.

He said the virus could present a temporary setback but the "material rebuild" after the bushfires would boost the economy in the second half of the year.

"Our assessment is that GDP growth for 2020 as a whole will be largely unaffected," he said.

Australian Associated Press