The Perrottet government faces some tricky choices in responding to the economic disruption caused by the Omicron surge.
Some sectors of the NSW economy are being hit by the so-called “self-imposed lockdown” as consumers limit their movements, and spending, to protect themselves and their families from COVID-19. Business groups warn that, after two years battling pandemic upheavals, some firms will not be able to ride out the latest shock.
NSW Treasurer Matt Kean has flagged more pandemic support for businessesCredit:Kate Geraghty
Despite the billions already spent propping up pandemic-affected businesses Treasurer Matt Kean has flagged further support. Although there has been debate within the government about the appropriate size and scope of any measures.
It would be tempting to unveil another generous, broadly targeted assistance package, especially with a clutch of state by-elections only weeks away.
But the choices will be shaped to some extent by the state’s deteriorating financial position. An official update last month revealed the NSW budget deficit would blow out to an unprecedented $20 billion this financial year thanks to the economic damage caused the Delta variant. The arrival of Omicron means that budget hole will grow even bigger. It is also set to add to state debt which has surged higher during the past two years.
That suggests a more prudent strategy would be highly targeted support for the most affected sectors, such as hospitality, and possibly smaller, more vulnerable firms.
All businesses continue to benefit from the Reserve Bank’s extraordinary measures to keep borrowing costs super low. There is little point providing handouts to medium and large firms with the reserves to withstand the latest disruptions, especially those in less affected sectors.
The economic effects of Omicron, and how long those effects will last, is still very uncertain.
Employment figures released on Thursday suggest the state economy had considerable momentum towards the end of last year. The unemployment rate in NSW fell to just 4 per cent in December – one of the lowest levels recorded since monthly figures were first published more than 40 years ago.
