Last Wednesday the Perrottet government relaxed mandates for masks, check-in requirements, and gathering density limits.
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But Professor Holden said the extra consumer caution likely to result from those changes had come at a bad time.
“December-January is a bumper time for a lot of retail and hospitality businesses,” he said. “If they don’t make their money there it is pretty tough on them for the whole year and that’s what it’s shaping up to look like in NSW – another really bad year.”
Premier Dominic Perrottet said on Sunday he does not expect restrictions to be tightened before Christmas, but the government is “constantly” monitoring the situation.
“This is all about individual responsibility and the people of NSW are doing just that,” he said. “The government can’t do everything. It’s over to the people of our state.”
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The NSW economy has had a volatile 2021 with strong economic conditions in the first half of the year giving way to a major slump following the Delta outbreak in July. The disruption caused economic activity to contract by 6.5 per cent over the September quarter (as measured by a key indicator called state final demand).
The government’s half-yearly budget review, released last Thursday, said the state was “set to rebound strongly” and predicted economic activity to return to pre-Delta levels by March. However, the review also warned the Omicron variant added “significant additional uncertainty” to the outlook.
Dr Oliver said last week’s relaxation of restrictions had “unnecessarily and significantly” increased the risk of another economic setback.
“It could really backfire,” he said.
Economist and chief executive of the Grattan Institute, Danielle Wood, said the decision to ease restrictions was “curious” given they were relatively low-cost interventions that could have significant health and confidence benefits.
“Economists are right to raise concerns,” she said. “We’ve seen the whole way through the pandemic that when people are not confident in the health situation we get a change in behaviour,” she said.
“If people feel less confident many will just stay home, and we could get the double whammy of bad health effects and bad economic effects.”
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