According to reporting by the Australian Financial Review, economists at ANZ and NAB think that the Australian economy will shrink in the first three months of this year because of the coronavirus and the bushfires affecting an already soft economy.
China is the biggest trading partner with Australia with all of the purchases of iron ore, the visiting tourists, the students and so on.
The combined effect of the coronavirus and the bushfires will, according to the economists, cause the Australian economy to shrink by 0.1% in the first quarter. The Australian travel ban on people who have recently been to mainland China is expected to be bad news for Aussie businesses depending on their purchases.
However, a rebound is expected in the second quarter with more growth in the third quarter and fourth quarter of 2020. This could mean that the overall effect on the economy in 2020 is quite small.
There are various businesses on the ASX that could see a disappointing March quarter such as tourism-related shares like Crown Resorts Ltd (ASX: CWN), Star Entertainment Group Ltd (ASX: SGR) and Sydney Airport Holdings Pty Ltd (ASX: SYD) – they will be on watch over the next few weeks and months.
The iron ore miners of BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) will also be watched for changes in demand, production and the iron ore price.
I expect this reporting season will be very interesting to monitor. The half-year results to December 2019 will probably be decent for most businesses, but their expectations and comments for the six months to June 2020 will be revealing if it’s just a blip or not.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited and Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.