Economists warn workforce disruptions will occur when Australia accepts living with virus

EY chief economist Jo Masters warns industries such as distribution, retail and construction, could face ongoing labour constraints while quarantining and isolation mandates remain in place, likely until next year.

"So many people that popped to the supermarket on the weekend may have found that the shelves were somewhat bare," Ms Masters said while speaking at a Centre for Economic Development of Australia virtual event on Wednesday.

"A lot of that is playing out as just large portions of the workforce that are isolating at home, not just related to restrictions but people that have COVID or that are close contacts."

Ongoing isolations are likely to remain while the virus is spreading throughout the community.

Anticipated business disruptions are based on what is occurring overseas, where workers are being forced to isolate and get tested if they have been exposed to COVID-19.

Ms Masters noted the global auditing firm had conducted research in the United Kingdom, showing more than a quarter of a business' workforce were impacted on any given day.

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"From a business perspective what they're finding is really elevated workforce disruption, some businesses in the UK are recording 20 to 30 per cent of their workforce at any given time, having to isolate, either with COVID or as a close contact," she said.

"That's really elevated business disruption and that's just going to mean that the shadow from COVID is longer and bumpier."

Ms Masters' comments were part of a broader discussion launched by CEDA, around the impact Delta was having on the jobs market and whether the economic recovery would follow a v-shape like it did last year.

Commonwealth Bank economist Gareth Aird who also spoke at the CEDA event, anticipated a COVID normal would likely not be reached until the middle of next year.

Prior to the hit of the Delta third wave, Australia had recorded its highest job vacancies rate with 363,500 unfilled positions.

Mr Aird believes it will take the economy until next year to recover from the current shock.

"I think that adjustment process means we don't snap back,' he said.

"Until we actually get through the process where we aren't living with COVID restrictions ... then we won't get that full recovery. So I'm thinking about middle of next year."

Lockdowns impacting the ACT, NSW and Victoria are tipped to dent economic growth for the September quarter, which both CBA and NAB expect a contraction in GDP greater than 4 four per cent.

In the June quarter, GDP rose 0.7 per cent, however Treasury is forecasting a fall to negative 2 per cent.

Mr Aird noted a pick up in the participation rate would possibly be delayed while some workers remained cautious about catching the virus, despite being vaccinated.

"I think there's going to be material proportion of people out there who are concerned about getting COVID," he said.

"The participation rate is not going to be back up at those levels [from] a few months ago. That ultimately is then going to weigh on the labour market and weigh on way on GDP and the economy."

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