Jamie Smyth reports from Sydney

Australia’s central bank has warned a delayed return to work in China due to the coronavirus would dent the local economy but said a combination of monetary and fiscal stimulus should enable it to bounce back once the virus is contained.

Guy Debelle, Reserve Bank of Australia deputy governor, said on Wednesday there is still significant disruption to the Chinese economy following the prolonged shut down over its lunar new year holiday. It is very uncertain how long it will take to repair severe disruption to supply chains, he said.

“The straight arithmetic of losing a substantial amount of output over a period of several weeks implies a significant hit to economic activity,” Mr Debelle said in a speech.

China is Australia’s largest trading partner and a collapse in student numbers and tourists from the country, with inbound airline capacity slumping 90 per cent from China, is forecast to subtract 0.5 per cent of growth from gross domestic product in the March quarter.

Mr Debelle said it was too uncertain to assess the impact of the virus beyond the March quarter. But he said there was no indication of disruption to exports of iron ore or coal at this stage and prices remained resilient- a factor that should support exports.

Mr Debelle said a government stimulus package, which is due to be announced this week, and record low interest rates would support the economy.

“The combined effect of fiscal and monetary policy will help us navigate a difficult period for the Australian economy. They will also help ensure the Australian economy is well placed to bounce back quickly once the virus is contained,” said Mr Debelle.