'Patchy' economy ahead as we jump 'into an Omicron fire': Deloitte

Tourism, hospitality, admin services, and arts and recreation will continue to encounter setbacks for the rest of the year due to the contagious strain that will put many exposed workers in isolation, Deloitte Access Economics' latest quarterly forecast has predicted.

But despite the warnings, the report conceded Australia, along with many countries around the world, would struggle further with the cost of maintaining "zero COVID" strategies and policies.

In Canberra, the outlook is "superb" with the territory having a "smaller hill to climb in terms of an economic recovery" due to pre-lockdown preparedness.

Deloitte partner Chris Richardson said the economic recovery of other eastern states, particularly NSW, had jumped "out of the Delta frying pan and into an Omicron fire" but would still be expected to fare reasonably well.

While "high touch" industries would not be spared from the variant's impacts, industries where workers could remain in home offices, such as the public sector, will remain strong.

"2022 may well avoid large and lengthy lockdowns, but Omicron's rise will keep our sectoral landscape one of low touch, low trust and low density compared with pre-pandemic norms," Mr Richardson said.

"Yet the bad news for those sectors will see matching good news for sectors that fight the pandemic and protect the economy - the likes of the public sector, finance and health will stay stronger for longer during 2022 because they'll need to, while another year of record harvests means farmers are doing even better."

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Early indications showed that despite lockdowns not being imposed during the dramatic rise in Omicron cases, consumer spending is still lagging behind pre-COVID levels, the economist said.

The ACT was in a good position, having weathered the Delta lockdown relatively well but the federal election threatened to slow down growth, Mr Richardson said.

"2022 is an election year, and government activity (both direct and via consultants) falls off ahead of an election and then takes time to wind back up again," hen said.

"As usual when the democracy sausage looms, that says a temporary slowdown is just around the corner."

Deloitte's predictions are trepidatious amid the threat of future COVID variants and an uneven global vaccination rate threaten to unravel progress.

Labor's treasury spokesperson Dr Jim Chalmers said the federal government's mishandling of the health response held back the country's recovery.

Rapid antigen test shortages and earlier vaccine and booster rollout delays in 2020 and 2021 were no cause for celebration, he said.

"Mismanaging the pandemic means mismanaging the economy," Dr Chalmers said.

"You can't have a healthy economy without healthy people.

"For the best part of two years now Scott Morrison and Josh Frydenberg have been taking credit for a recovery without doing their jobs to actually secure it.

"The same complacency and incompetence that's given Australians a shortage of groceries and rapid tests has given workers a shortage of wages growth for almost a decade."

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