Travel and tourism will be hit hardest by the outbreak of swine flu, but the retail, hospitality and entertainment sectors are also likely to be hit, according to economists.
However, there could be some winners, including pharmaceutical and health companies, the telecommunications sector and even online retailers.
The forecast comes as the number of Australians being tested for the flu has increased from 90 to 128, although no cases have been confirmed yet.
The World Health Organisation – which has attempted to officially change the name of the outbreak from swine flu to Influenza A (H1N1) to placate the meat and pork industries – has warned that countries in the southern hemisphere could be more susceptible to a flu outbreak as they are heading into winter.
There has been reports that supplies of masks are running out in Australia and it has been also been suggested that local health officials could soon advise Australians to stock up on 14 days worth of food, water and other essential supplies.
Coming as it does in the midst of the worst financial crisis in almost 70 years, ANZ economist Julie Toth says the flu outbreak is with the “worst kind of risk…at the worst possible time”.
“With the world economy already set to shrink this year and achieve only mild growth in 2010, a flu pandemic – or even the threat of one – will be a severe setback to global trade and investment recovery.”
Toth says the aviation sector, travel agencies and hospitality providers are likely to be hit hardest by a worsening outbreak. ANZ points out that the SARS outbreak contributed to a 5% fall in short-term visitor arrivals between November 2002 to July 2003, although the effects on the wider economy were muted.
“Currently this epidemic is centred on the Americas, but if it spreads to our major trading partners in Asia then the potential economic effects for Australian trade and tourism could be severe.”
Aside from the travel sector, ANZ predicts service-related sectors could also be hit “as people find yet another reason to stay home and save money”. This could include the transport sector (such as taxis and buses) and entertainment sectors.
Manufacturers and retailers of non-discretionary services (such as furniture, clothing, appliances and footwear) could also take a hit as consumers concentrate on buying essentials.
“If public warnings need to be issued regarding public gatherings and social contact however (as they have already in Mexico), then restaurants, hotels, bars and other public venues will be hit hard.”
However, there are some possible winners from the outbreak, lead by pharmacies, the pharmaceuticals and food retailers, particularly if the Government urges Australians to stockpile supplies.
Toth also suggests telecommunications companies and online retailers could also benefit if consumers are forced to bunker down.
ANZ predicts the Australian dollar could fall if global investors retreat to so-called safe-haven currencies such as the Swiss franc and the US dollar. Another safe haven investment, gold, could also rise.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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