Ms Emmett and Mr Plank said with the number of virus cases now above 20,000, and many countries imposing travel bans, there would be a measurable impact on the Australian economy.
“The economic impact of the virus has been brought into sharper focus by the measures taken to limit the spread,” they said.
“The understandable travel ban in place in Australia on all foreign nationals who have been in China, as well as airline cancellations, will act to sharply reduce the level of tourist arrivals.”
The ANZ lowered expectations after the ban on non-citizens from China, which is affecting the tourist and education sectors, which it expects will have a sizeable financial impact.
ANZ believes arrivals from China could fall by 85 per cent through November. China is the largest source of Australian tourists and students.
Travel from countries other than China is also expected to fall as tourists decide to put off international travel because of concerns about the virus.
Domestically, Ms Emmett and Mr Plank said local consumers and businesses would feel the pinch from the virus.
“Local consumer sentiment took a hit from the bushfires and the news regarding the virus is keeping confidence levels low,” they said.
“Rising uncertainty about the impact of the virus is likely to test business confidence, and there is the potential for investment plans to be delayed.”
They noted the broader, global impact of virus was now evident, pointing to the decision of Hyundai in South Korea to shut down all its car manufacturing plants because it could not get supplies from China.
While the March quarter is tipped to be negative, the ANZ expects a turnaround in the June quarter with a rebound in the tourism sector likely to be experienced through the second half of the year.
Separate research from ratings agency S&P Global, also released on Wednesday, suggests the next couple of months will see the worst of the economic fallout from the coronavirus.
It assumes the virus starts to stabilise by April with virtually no new transmissions in May.
If that came to pass, it believes economic activity across the Asia-Pacific region will be lower through the first six months of this year before a recovery that will continue into 2021.
China will be one of the worst hit, with overall GDP growth in Australia’s largest trading partner tipped to be down by 1.2 percentage points this year. That would take annual growth below 5 per cent for the first time since China started releasing quarterly GDP measurements in the early 1990s.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.