Just a couple of weeks ago, there was every reason to expect Australia’s economy in 2022 would be booming, with the peak nicely aligning with the likely federal election period.
The Omicron variant had just landed in the country, though, and posed only a cloud on the horizon at that point.
By mid-December, though, modelling indicated NSW alone might be recording 25,000 Covid-19 cases a day by the end of January. On that day, the state registered 1,360 new cases, making the prediction seem a bit of a stretch.
That was then. With 11,000-plus daily cases reported today, that 25,000-figure might not be far away given the lag in testing and receiving results, and the limits on how many people can get tested because of holiday curbs and staff shortages.
Economists had hoped to be among those enjoying the Christmas to New Year’s lull, not least because the main statistics sources, such as the ABS, won’t resume until 10 January.
Now they are among those watching for signs that consumer and business confidence will be dented by disruptions to holiday plans and the fallout that may have on spending in the economy.
The answer, so far, is that it’s too early to tell. Transactional data will take a while to be collected to tell if cancelled holidays just mean the money gets spent closer to home.
Alan Oster, the NAB Group chief economist, noted the market was already bracing for a negative retail sales figure for December compared with the previous month. That was more because of the growing popularity of Black Friday online sales rather than a demand dent from Omicron.
“I would have thought confidence might have had a bit of a hit,” Oster said. “[As for] actual conditions, their sales, their profits, their employment, I suspect less so.
“It will be soft, and people will say it was Omicron but it won’t be – it’ll be the change when people buy from Black Friday rather than Boxing Day sales,” he said.
NAB’s last economic report for 2021, released on 17 December, predicted Australia’s economy would rebound sharply from the 1.9% contraction in the September quarter. The bank is predicting a 4% expansion for Australia’s economy, less than the Reserve Bank of Australia’s 5.5% forecast.
“I’m not sure [Omicron’s] going to change the outcome that much but I would not want to be defending a 5.5 to 6% growth rate in 2022,” Oster said.
“We always assumed that international travel wouldn’t really start at least until the middle of next year,” he said, adding NAB’s other key assumption remains that governments will not lock down borders.