Covid 19 Omicron: 'De facto lockdowns' - impact of the Big Sick on the economy

The peak of the Omicron outbreak could see as many as 350,000 New Zealanders isolating at home at the same time, according to a recently authored paper. Photo / 123RF

The rapid spread of the Omicron variant in the coming weeks could plunge the economy into a "de facto lockdown".

The peak of the Omicron outbreak could see as many as 350,000 New Zealanders isolating at home at the same time.

Many of these people will not be able to work from home, meaning workplace absenteeism could be as high as 12 per cent.

These staggering figures on the potential impact of the Omicron variant to the economy come from a paper authored by Infometrics principal economist Brad Olsen.

"High worker absenteeism will present a limit to economic activity," Olsen said.

"Reduced economic output will result from businesses not being able to open, or not being able to be staffed like normal.

"Fewer people being able to work, fewer people willing to go out and risk contracting Covid-19, and fewer people able to access the businesses they need due to worker shortages will all culminate in periods of de-facto lockdowns."

The Government has said it will not be imposing lockdown restrictions on the country, but the impact of self-isolation rules and workplace absenteeism could result in conditions not dissimilar from a lockdown.

The major CBDs around the country have already seen the effect of the Omicron threat, as many corporates shift back to working from home. Most large events were also cancelled almost immediately off the back of the shift to the red light setting.

Olsen notes that businesses will need to determine how to enable operations to continue throughout the outbreak and how to limit exposure of staff.

New Zealand need only look across the Tasman to see the impact widespread infection can have on certain industries.

Olsen notes that the Australian Transport Workers' Union estimated between 33 and 50 per cent of truck drivers were unavailable, while Woolworths stated that 20 per cent of supermarket distribution workers and 10 per cent of supermarket store workers were unavailable.

"Health and social services are also expected to be hit," the economist says.

"Hauora Tairāwhiti are expecting 33 per cent of their workforce might be unable to operate at the height of an Omicron outbreak. New Zealand rest home operators are planning for 10 per cent to 14 per cent absenteeism, based on the experience in Australia."

The direct cost of absence across the economy in 2020 was $1.85 billion, according to the Southern Cross Workplace Wellness report released earlier this year.

This was based on Kiwis taking an average of 4.2 days of sick leave over the course of the year.

Given that international examples have shown a big rise in absenteeism during an Omicron outbreak, we can expect this burden to increase even further in the coming year.

Sick people and those self-isolating won't be allowed to leave their homes. Photo / Getty Images

The New Zealand Government has outlined two support schemes to assist businesses bearing the brunt of workplace absenteeism: the Leave Support Scheme (LSS) and the Covid-19 Short-Term Absence Payment (STAP).

The LSS support package is for workers who have been told to self-isolate by health officials and cannot complete their work tasks from home. Employers successful in their application will receive $600 a week for full-time workers and $359 a week for part-time workers.

The STAP payment is to help businesses keep paying eligible employees who need to miss work while waiting for a Covid-19 test result. This package provides a one-off payment of $359 for each available employee.

Both of these support packages have been used for previous outbreaks, but Omicron will bring a far heavier economic burden for the Government.

"Omicron is set to far eclipse peak coverage for both LSS and STAP," Olsen said.

"If, as the previously noted ministerial comment has assumed, New Zealand sees a peak of 25,000 cases a day and 350,000 people off work, there is a $210 million per week upper limit on LSS alone. Such costs are important to bear and are less expensive than the Wage Subsidy. But they are still material costs for the Government."

The unavailability of workers amid a period of widespread sickness will also lead to supply chain pressure and shortages of certain goods.

"Analysis of supermarket shelves in the UK for key items suggests that supply will be unable to cope with the increased demand for medicines," Olsen says.

"In early 2022, a larger proportion of paracetamol and ibuprofen shelf availability was rated as low or no stock available. Around 29 per cent of paracetamol shelves were low or empty, compared to just over 10 per cent of all shelves."

Other goods that could prove difficult to access include dried pasta, toilet rolls, crisps and fresh fish.

"Short-term disruptions and periods of low or no availability of goods is to be expected," Olsen notes.

"Some stocking up of supplies is expected by New Zealanders and is appropriate with the need to be able to isolate throughout the Omicron outbreak if required."

The heightened anxiety across the country will also lead to people leaving their homes less than under normal circumstances.

"Overseas evidence also highlights that people are likely to reduce their activity in the economy throughout an Omicron outbreak," Olsen says.

Australian spending and sentiment data from ANZ shows a considerable fall in early 2022, as people become more cautious about going out, and more people are required to stay home."

Restaurant activity was hit particularly hard, with worldwide restaurant activity dropping to around 25 per cent of pre-pandemic levels since the beginning of 2022. This impact will carry over into New Zealand, striking the struggling industry with yet another financial blow.