Will Omicron variant derail Australia's economic recovery?

While the Omicron variant has caused much stir across different parts of the globe, Australian policymakers continue to debate whether its impact will be damper relative to the Delta variant. The new variant has hit the country at a time that was strategically important for the economic revival. As the economy was just opening and businesses resumed operations, the new cases created a cloudy environment surrounding the nation’s economic recovery.

Federal authorities are trying to chart out a plan that lets them open the country even as the New South Wales cluster grew to 25 cases. For instance, the Queensland domestic border would see an earlier-than-expected opening on December 13, with certain protocols to be followed.

Will Omicron variant derail Australia's economic recovery?

However, not all states have resounded with the hopeful sentiment that the new variant would be milder than the previous ones. Some regions have decided that the new variant should not be tested and instead, it is best to take preventive measures.

For Australia, rising lockdowns and the imposition of the virus-related protocol has emerged with an additional burden of mass unrest, evident through several demonstrations across the country. Amid this backlash from some individuals, Australia’s vaccination rate stands at about 88 per cent for those above 16 years of age. This could help the country build immunity against the new strain while putting the economy in less turmoil.

Too early for preventive measures?

Despite all the hysteria surrounding the mutating virus, authorities seemed to have given a relatively lukewarm reaction regarding the new strain, which has already become a global concern. Treasurer Josh Frydenberg expressed his seemingly hopeful view on the matter, stating that the country’s 2022 economic growth forecast would see an upward revision at the mid-year budget review.

It can be assumed that the improved forecast does not factor in much of the impact of the Omicron variant. Treasurer Frydenberg, himself, stated that it is too early to estimate the effects of the new outbreak.

Notching up Aussies’ hopes, the Reserve Bank of Australia (RBA) has recently shared an upbeat view on the economy’s prospects. While keeping the interest rate unchanged, the central bank does not expect Omicron to derail the country’s economic recovery and foresees a return to the robust growth trajectory seen prior to recent lockdowns.

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Economic revival going strong

The Australian economy is going from strength to strength since the easing of virus restrictions. The first indication of an improving economy was the rise in business confidence, followed by slower price growth in the housing market, with the country nearing its inflation target. Subsequently, the country observed better-than-expected economic growth in the third quarter, with GDP contracting by 1.9 per cent, majorly due to the Delta variant outbreak. These factors have put the country in a better position than it had been in during the previous outbreaks.

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While these factors provide some respite from the growing uncertainty, the impact of the new variant cannot be ignored. Stock markets have been hit by the news surrounding the new variant and some experts appear to have a less rosy prediction for the future. Despite the opposing views regarding the severity of the virus, people stand united on the subject of the nation’s resilience to power through new adversities.

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