Australia’s labour market will have to change gear yet again – ANZ

Caution about being in public places and staff shortages are stifling household spending. ANZ-observed data show spending in early January resembled lockdown conditions, particularly in Sydney and Melbourne.

Currently, we expect the economic effects from Omicron will be temporary. Resilient consumer confidence in financial conditions points to a rapid recovery in spending once health risks ease. 

Assuming this is correct, once cases fall to much lower numbers, we still expect labour underutilisation to fall in 2022, putting upward pressure on wage growth.

Data revisions suggest closed international borders have had a smaller effect on Australia’s labour supply than previously thought, adding to the argument that demand has been the key driver of the recovery.

But the record high job vacancy rate means that more Australian and overseas workers are needed in productive jobs to realise potential employment and economic growth.

There are some positive signs for wage growth, including more workers expecting to change jobs and higher inflation expectations, but Omicron could delay the acceleration.

While reported difficulty finding labour remains elevated, there is still significant room to reduce spare capacity in the form of underemployment across several industries.