Panic over the COVID-19 outbreak is harming the nation's economic outlook and efforts to staunch the damage should focus on confidence, Deloitte economist Chris Richardson says.
As the sharemarket had its worst single day loss in nearly a dozen years, economists urged responses that recognised the problem as fear-driven and as an economic shock centred on the labour-market.
Mr Richardson, partner at Deloitte Access Economics, said economic health would depend on confidence.
"The depth of damage to the economy is a function of panic," he said.
"Right now, we are self harming with our own panic.
"People are much more scared about the impact on the economy than we should be, and that makes it worse."
The number of confirmed cases in Australia reached more than 80 and the S&P/ASX200 index shed about $155 billion in value on Monday, plunging 7.33 per cent.
Oil prices fell to as low as $US31.48 amid a brewing price war.
Mr Richardson said the oil price movement would deliver a kind of financial relief to households, taking about 14c a litre off petrol prices and giving $2.4 billion back to Australian motorists.
Economist Saul Eslake said Monday's sharemarket falls combined with previous declines suggested investors were becoming more pessimistic about the near-term outlook for economic activity.
But investors up to this point didn't appear to think the situation would become as bad as in the GFC.
"Presumably that reflects an expectation that the COVID-19 outbreak will eventually pass, whether because a vaccine will be developed and made widely available, or because (as some epidemiologists have suggested) almost everyone will end up getting it, and from that point (whenever it might be), things can only start to improve," Mr Eslake said.
"Note that it wasn't possible to make either of these assumptions during the GFC."
Treasurer Josh Frydenberg said the coronavirus outbreak was a different economic situation to the global financial crisis and sought to inject calm into the nation.
Mr Eslake said the Treasurer was right to draw the distinction, saying the slow down following the GFC had different causes to the economic fall-out of COVID-19.
"Financial markets are reacting to something that is happening in the 'real world', the virus outbreak, and the reactions of governments, businesses and people to it, and the economic consequences (including for the earnings of listed companies) of those reactions."
Mr Eslake said while it was still premature to make definitive forecasts, it seemed increasingly plausible that the COVID-19 outbreak represented the shock that brought to an end Australia's record-breaking run of continuous economic growth.
The federal government is considering a substantial stimulus package directed at Australian businesses and workers, support that Mr Frydenberg said on Monday would be delivered using existing tax and transfer systems, which includes welfare payments, family assistance and pensions.
Mr Frydenberg described the package under consideration as "substantial" but didn't say how much it would cost.
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Industry Super chief economist Stephen Anthony said responses to the problem needed to recognise it as an economic shock centred in the labour market, which was affecting supply chains, and flowing onto exports and imports.
Federal financial authorities could best help by ensuring money was still available and liquidity wasn't a problem for businesses, Dr Anthony said.
Employers would need to let workers manage their illnesses if they were infected with COVID-19 and understand they still needed their income flowing, he said. Employees would have to keep in mind businesses needed to keep operating and required their staff when available.
