The new wave of COVID-19 variant Omicron is currently in full swing across the country. We’re now beginning to see the knock-on effects this case explosion is having on the Australian business community.
Let’s unpack some of the major effects the rapid spread of Omicron is having on the economy and businesses at large.
With rampant case numbers comes the inevitable issue of staffing. With employees either contracting COVID or unable to work due to close contact isolation, the ability of hundreds of thousands of Australian to attend work has been seriously hampered.
The AFR has announced the results of a KPMG survey noting that,
“Hundreds of Australian business leaders cite crippling labour shortages as their biggest challenge going into 2022 and warn they will remain a concern for the next three to five years.”
After polling over 400 business leaders around the country, KPMG found that 70% pinpointed acquiring and retaining talent as their key worry.
Supply chain issues
Hand in hand with the issue of staff shortages is the impact this has had on supply chains around the country, particularly in eastern states.
Even giants like Coles and Woolworths are experiencing significant reductions in supply and productivity, all the way back to farmers and source suppliers. This has even prompted sale limits on certain items and a host of empty shelves, not seen since the beginning of the pandemic.
KFC for example have been forced to reduce their menu amid the supply crisis. Ingham’s, who supply KFC their chicken, said in a statement, which saw their stock tumble 6%,
“The rapid spread of the Omicron variant across eastern Australian states from December 2021 and the resulting staff shortages, are now also having a significant impact on the Australian supply chain, operations, logistics and sales performance of Ingham’s, and some of its suppliers and customers,”
If such well-connected and prosperous businesses like these have been so severely impacted, it’s not difficult to imagine the impact on smaller businesses with less clout and resources.
Small businesses hit hardest
Small businesses in Australia have been slammed with a double dose of turmoil.
On one hand they have to contend with their own staff absences on top of their similarly affected supply chains. On the other hand, consumer confidence and business visitation is also in a downward spiral, as people avoid retail spaces and expenditure.
This conjoining of difficulties has created a soup of challenging circumstances for already beleaguered Australian small businesses.
As Alex Boyd, head of the Council of Small Business Organisations, said to the ABC on Wednesday,
“Essentially [small businesses] are in a lockdown … there is little support out there to help them keep their doors open,”
Economic recovery hampered but optimistic
While Australia has battled the virus like much of the world, it looked as though economic recovery and future outlook was optimistic.
In fact, from October through November 2021, retail sales surged past the predictions. According to the Australian Bureau of Statistics, retail sales jumped 7.9 percent in November, adding to a 4.9 percent increase in October.
“Consumers brought forward Christmas spending to take advantage of sales and minimise delivery and stock availability concerns ahead of the festive season,”
said Ben James, ABS’ director of quarterly economy-wide statistics.
While December was always going to see a downturn, with Omicron ripping through the country, that retail sales dip was certainly deeper than normal.
Share market drop
On the back of the rampant infection rate in Australia in December, the share market responded with a significant drop. Economic confidence took a hit and this rippled through the ASX.
While it’s true that the Christmas period saw a weakening of the ASX, we’re now already seeing a hint of cautious confidence return to the share market, sowing a positive outlook for both investors and businesses.
Amid the doom and gloom, however, is the silver lining that there’s still a lot of confidence in an economic resurge. Household savings are strong and there are good signs that spending will resume once consumers feel safe doing so.
“The good news is that people are still relatively happy about their own financial circumstances,”
said ANZ’s head of Australian economics David Plank.
“This potentially sets things up for a rapid rebound once people are more confident about health outcomes.”