Omicron ‘to curb economic growth’ in Australia, warns Deloitte partner

Omicron is forecast to limit Australia’s economic growth to 4 per cent this year, short of the Reserve Bank’s pre-variant prediction.

Chris Richardson from Deloitte Access Economics. Picture: Richard Jupe

The Omicron variant is forecast to limit Australia’s economic growth to 4 per cent this year, down from the 5.5 per cent predicted by the Reserve Bank of Australia before the emergence of the strain.

Deloitte Access Economics partner Chris Richardson said Omicron was spreading at such a rapid rate that half of the workforce would likely miss an extra week of work in the first half of the year.

“That is the main reason why our forecasts for 2022 are more modest than those of the RBA (released in) November,” Mr Richardson said.

“They have 5.5 per cent real GDP growth in the year to ­December 2022, whereas we have 4 per cent, with Omicron weighing on everything from business investment … to ­borders.”

However, Mr Richardson said Omicron would not cause anywhere near the same economic pain as the first wave of Covid-19 in 2020 and the Delta wave last year, which caused widespread lockdowns.

“Omicron is awful but for the first time in the coronavirus crisis it looks as if health and economic outcomes won’t be in exact lock-step with each other.

“In turn, outcomes are looking pretty good for jobs and unemployment,” Mr Richardson said.

“We remain of the view that even with the Omicron wave, the damage to federal and state budgets in 2021-22 is less than official estimates.”

Deloitte’s Business Outlook report released on Sunday night predicts the unemployment rate will fall to 4.2 per cent by the end of the year, compared to 4.6 per cent at the end of 2021.

Household spending is forecast to rise by 6.2 per cent while business investment would increase by 5.2 per cent.

Wage growth is forecast to increase by 2.4 per cent this year and by 2.8 per cent in 2023, compared to 1.9 per cent last year.

Economic growth will be strongest in NSW (5.2 per cent) and the Northern Territory (6.9 per cent), followed by Queensland (3 per cent), Western Australia (3 per cent), Victoria (2.8 per cent), Tasmania (2.8 per cent) and South Australia (1.6 per cent).

Output in the accommodation and food sector is predicted to increase by 13 per cent as inter­national tourism recommences.

Josh Frydenberg said the report showed that Australia’s economic fundamentals were strong.

“Deloitte reminds us that we are still in a pandemic and that Covid-19 will continue to pose a threat to Australia’s economic recovery,” the Treasurer said.

“That is why we must learn to live with Covid-19.

“High vaccination rates, the widespread rollout of boosters and increased resilience to Covid as Australians adapt all put us in good stead to recover strongly, without the need for widespread and lengthy lockdowns.”

Opposition Treasury spokesman Jim Chalmers said the economic recovery would be stronger “if not for the Morrison government’s failures on the health front”.

“One of the world’s slowest booster rollouts and a crippling shortage of a rapid tests has economic consequences,” Dr Chalmers said.

“Australians who’ve done their jobs during the pandemic are being let down badly by a Prime Minister unwilling or incapable of doing his.

“For the best part of two years now, Scott Morrison and Josh Frydenberg have been ­taking ­credit for a recovery without doing their jobs to actually ­secure it.

“The same complacency and incompetence that has given Australians a shortage of groceries and rapid tests has given workers a shortage of wages growth for almost a decade.”