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By Will Ellis

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Last Updated on June 4, 2022

All signs point to a recession as the Omicron variant puts Aussies in a strange new kind of lockdown. And the spectral financial impact is already being seen.

According to several AU reports, it looked like it was safe to go back into business, but Aussies have been hit with the Omicron variant and this is infecting AU rights again. This comes as many parts of the EU begin to ration food as supermarkets portion against restricted trading from Russia and its allies. France has already adopted food vouchers. 

This time, the state is in an elective lockdown, where some Aussies are opting to stay at home in the belief that this is necessary to safeguard themselves and loved ones. 

Whether state-mandated or otherwise, the impact on the financials for the AU remains grim. 

Credit Card consumerism Down

Many forms of ‘nowcasting’ indicators suggest that the shadow lockdown is almost as bad as the economic impact caused by the Delta lockdowns in H2 of 2021.

For instance, a report by ANZ says credit card consumerism is bad:

This data from ANZ suggests consumerism tanked at the end of December and the opening of 2022, which runs parallel with when the Omicron variant spread.

According to Westpac, this is a grim situation indeed:

Westpac adds that there is a fall in consumerism.  Although Australian states have ‘opened up’, Aussies have been resistant to go outside during the holiday period – and it’s adding up.

A suggestion from CBA is that things are more positive with indicators that consumerism may be recovering.

Each of these live credit card trackers all use certain biases, however, it seems overall that the Omicron variant has caused a substantial home consumerism blow that is most damaging to the big financial service sectors. This includes 70% of consumerism and roughly 40% GDP.

This is also the highest employment-heavy sector of the economy. This means the impact is going to be seen most in the short-term. Particularly because this is going to be the first Covid-19 lockdown to occur without any additional state fiscal support to balance it.

Nevertheless, there are two positive notes to consider that suggest most of the impact will be short term.

When Will the Omicron Variant Recession End?

The first indication for this being temporary is that it has been forecasted that the biggest part of the Omicron variant hit will likely be over in a few weeks. Because Omicron is so highly infectious, the hit is expected to be hard and fast – which runs parallel to the experiences of other nations.

However, this won’t end the infection numbers, or the impact. Once schools re-open, a spike in virus infections will likely occur and may deliver another blow, though probably a smaller elective lockdown. Considering that fact Aussies are opting to lock themselves will also sustain the Omicron variant spread.

Nevertheless, by the close of Q1, a good bit of the Omicron variant’s impact should have ended. And so should financial impacts, although they will linger as long as Aussies choose safety over consumerism.

Another cause for optimism, according to this report, is that during this period, homes will have plenty of savings added – which they will be able to spend afteremerge.

The report adds that home net savings have shot through the roof during Covid. Keep in mind that there was a very strong employment market going into the Omicron variant wave, even though this was somewhat amplified by the churn of an unusually large number of resignations.

Unemployment has shrunk to lower than it has been for decades. So all-in-all, Q1 2022 should see shrinking consumerism growth and diminishing GDP. This seems to mean there will be a new addition to the Delta shock recession.

What do you think? We think this recession has been in the pipeworks a lot longer than Delta. And a new Great Depression could be on the horizon. Be prepared.