The government introduced strict travel restrictions at the beginning of February, extending them on Thursday for another week, to stop non-Australians travelling out of China to help limit the spread of coronavirus.
“Other countries are taking similar steps, and I note that China is also working hard to restrict the movement of the virus, including locking down some of its cities, and restricting travel and transport,” Mr Frydenberg said in his letter, adding that he acknowledged that the attempts at containment would have economic impacts.
China’s reduced consumption and travel would have “flow-on impacts” for Australia, even before considering the effect of the travel ban, he said.
He pointed out that the short-term economic effects would be significant for international tourism, particularly from China, and international students unable to travel or return to Australia. Travellers from China made up 15 per cent of all short-term visitors in 2018-19, and 28 per cent of foreign students in 2019 were from China.
Under the SARS outbreak there was a 9 per cent drop in total short-term visitor arrivals and when looking at the fall in services exports on gross domestic product, the outbreak was responsible for reducing real GDP growth by 0.2 percentage points in the most-affected quarter.
“If the outbreak continues to spread and is prolonged, the markets for commodities and other exports may also be disrupted and there could be effects on consumer confidence, particularly if more cases are confirmed in Australia,” he said.
Reserve Bank governor Philip Lowe has also said the impact is likely to be greater than SARS.
Mr Frydenberg pointed out the outbreak was different to SARS as the response had been swifter and stronger, including an “unprecedented” lockdown from China on some regions, and trade and transport restrictions.
“These actions should help to contain the virus quickly, but may also exacerbate the economic shock in the short term,” he said.
The Chinese economy is almost four times larger in 2020 than 2003, he said, and Australia is much more exposed to that market, including in terms of tourism export value and international education.
“After the SARS virus was contained, China, the region and Australia all saw significant bounce-backs. Once we succeed in containing the coronavirus, we would expect a similar recovery. The key question is how long this may take.”
He also urged Mr Chalmers to understand the role everyone had to play in helping support the “confidence in the community and not talk down the economy”.
Mr Chalmers responded in a letter on Friday, expressing disappointment there was no advice on what is being done for businesses impacted by the outbreak.
“There is a substantial degree of concern and uncertainty in the business community over the impacts of the coronavirus outbreak on industry, especially those exposed to Chinese markets and other markets in the region, and your response does little to reassure them that you are managing this challenge appropriately,” he wrote.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.