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Ratings agency Standard & Poor’s (S&P) thinks the Reserve Bank of India (RBA) will be forced to cut interest rates, as coronavirus outbreak will deliver a material knock to Australia’s growth. 

Key points

Gross Domestic Product (GDP) could be as low as 1.7% – down significantly from the previous forecast of 2.2%. 

Tourism and education sectors are likely to take hit due to virus outbreak. Many Chinese students may not be able to start the new academic year. 

Commodity prices could feel the pull of gravity. 

On the bright side, weaker AUD would act as cushion. 

The RBA kept interest rates unchanged at a record low of 0.75% earlier this month and said it may refrain from cutting rates for some time, disppointing traders expecting a dovish stance in the wake of the virus outbreak. 

However, the minutes released Tuesday flagged concerns about the coronavirus outbreak and noted there was a case a for further cuts lower rates could speed progress toward bank’s inflation and employment goals. 

Expert score

5

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