Things have worsened quickly with Queensland’s omicron outbreak, and we really hope it is just a “short, sharp” outbreak as many health experts are predicting. The Brisbane Times has reported “University of Sydney infectious diseases expert Robert Booy also forecast the Omicron wave would soar and fall at breakneck speed.” Regarding its economic impact, I expect or rather hope its adverse effect, from suppressed activity in hospitality mainly, is confined to January and early February and it doesn’t detract from the overall economic outlook for 2022, which was reasonably good pre-omicron, as I noted in my post last Thursday, published a couple of hours before I learned Queensland had 10k daily COVID cases. Now the state government is telling people to work from home and to keep school children at home for the first two weeks of school.
So far, Queenslanders haven’t been limiting our movements, and likely our spending, as much as people in southern states according to Google Mobility data (see chart below which includes data up to Thursday 6 January), but let’s see what happens in coming weeks. No doubt the high COVID case numbers will worry many people and suppress activity, particularly in hospitality, further.
There is a risk Queensland will see the substantial adverse economic impacts of what is being called a pseudo or virtual lockdown, something which has sharply reduced spending in NSW and Victoria, and, so far, to a lesser extent in Queensland, according to an ANZ Research analysis, which was reported in various places including at news.com.au. I saw somewhere Deloitte Access Economics’ Chris Richardson made a comment along the lines of how we shouldn’t over-interpret one week’s data from an unusual period and I fully concur with that. It may be too soon to tell what’s going on exactly.
Finally, while nothing is certain and Treasurer Josh Frydenberg has warned the economic recovery is not yet locked in, I’d say it’s reasonably likely the economy will recover quickly from whatever temporary weakness is brought about in the near-term from the pseudo-lockdown, which hopefully will end by early February. After all, pre-omicron leading indicators looked good. Furthermore, the monetary expansion (e.g. a 22% growth in the M3 money supply measure since the end of 2019) associated with the pandemic response means that households and businesses have a substantially higher stock of real money balances and purchasing power, given that inflation has remained relatively low (for now at least).
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