First detected in the Chinese city of Wuhan, the pneumonia-like virus has infected more than 81,000 people globally and killed over 2,700. Most of the cases have occurred in China, where quarantine measures grounded factory activities to a halt for an extended period of time. Economists have said that would affect growth in the first quarter and may extend to the second quarter.
China is Australia's biggest trading partner and is part of the supply chain for all consumer products, Mathan Somasundaram, a market portfolio strategist at Blue Ocean Equities, told CNBC.
"The world looks at Australia as a proxy for China. Simply put, they sneeze and we are sick. China shutdown will cut into their GDP growth and definitely (would) do damage to Australian GDP growth," he said.
That's compounded by the lasting impact from the local bushfires that forced tens of thousands to evacuate their homes. Assuming the situation does not worsen, experts pointed to three main areas where the coronavirus impact is going to be felt: exports, education, and tourism.
Some of Australia's major exports include iron ore, metallurgical and thermal coal, and liquefied natural gas and energy products, and China is one of the biggest consumers of those products. Data from the Australian Bureau of Statistics showed the country exported 13.89 billion Australian dollars ($9.1 billion) worth of merchandise to China in December 2019, accounting for about 34% of total exports for the month.
"China takes about a third of Australia's exports and the big ones, of course, are iron ore and coal," Shane Oliver, head of investment strategy and chief economist at AMP Capital, told CNBC earlier this month.
He explained that as factories in China remain idle, the demand for coal and iron ore declines. Oliver also predicted Australia's economy would decline 0.1% in the January-March quarter before rebounding in the subsequent three months.
Australian resource producers, including BHP, have warned about business uncertainties in the near-term as they assess the virus' impact on outlook.
Beyond China, the health of the broader Asia region is also critically important to Australia, according to Andrew Ticehurst, senior economist at Nomura Australia.
"The region accounts for around 70% of Australia's exports, so weaker growth in China, which leads to weaker growth across the region, will likely generate negative second-round impacts," he wrote in a Feb. 17 note. Nomura also predicted negative on-quarter growth is likely for the January-March period.
Following the ban on non-resident foreigners entering Australia from China, the government last week eased some of its restrictions, paving the way for some Chinese high school students to return, Reuters reported.
Chinese students account for about 0.6% of Australia's gross domestic product, AMP Capital's Oliver said.
The government is deciding whether to also allow tertiary education students to return, according to Reuters. Some universities have already delayed the start of term and it is likely to affect their financial standing because of relatively lower international enrollments and exchange programs.
Top Australian universities could face more immediate credit risks compared to their global peers as Chinese students make up about 60% of the international cohort at those institutions, Moody's Investors Service said in a report earlier this month. If the virus is not contained in the next few months, Australian universities could face materially lower revenue and cash reserves, Moody's said.
In the 12 months that ended last September, Australia received about 8.66 million visitors, according to the Australian Bureau of Statistics. Among them, 1.33 million were from China and they accounted for 27% of the A$45 billion visitors spent in the country on their trips.
Experts agreed that the travel ban had an immediate impact on tourist arrivals in Australia, especially as February is usually the busiest month for Chinese tourists due to the Lunar New Year holidays.
Morgan Stanley analysts drew comparisons to the impact on the tourism sector during the SARS outbreak, or severe acute respiratory syndrome.
"A disruption in tourists does not generally result in a bounce back later in the year — this demand is generally lost," they said in a February report.
Despite the reasonably grim outlook from economists, Australia does have a few things on its side, according to Nomura's Ticehurst.
He explained that the country's moderately open economy is less exposed to trade than other countries in the Asia-Pacific region — Australian exports represent about 23% of GDP, he said.
The floating Australian dollar would adjust according to risks, meaning the worse the outlook, the lower the currency.
Finally, Ticehurst added, Australia "has capacity for both monetary and fiscal responses, and politicians and policymakers have signaled a willingness to act, if and as necessary."