Expect changing restrictions and labor shortages across the country
Australia’s rapid surge of COVID-19 cases is creating a highly volatile business environment. Individual states are implementing varying levels of restrictions to curb the spread of the Omicron variant, which makes demand planning for firms increasingly challenging. This problem is likely to become more acute in the coming weeks as cases continue to rise, potentially resulting in tighter restrictions across the country. As a result, firms should regularly align with local teams to stay ahead of changing restrictions and to flexibly respond to changes in policy.
Additionally, firms should prepare for personnel-related challenges to increase due to the strict quarantine measures in place in Australia. The issue of labor shortages, which have so far been concentrated in the hospitality industry, are spreading across the economy, with instances of both supply chain breakdowns and business closures becoming increasingly common. This makes it important for MNCs to incorporate greater flexibility into their supply chains and increase the emphasis on their e-commerce channels to effectively cope with the volatile operational environment in Australia.
COVID-19 cases have exploded in Australia over the last three weeks since the arrival of Omicron. Daily new cases passed the 100,000 mark for the first time last week and are likely to increase over the coming weeks. Public healthcare systems in states such as New South Wales (NSW) and Victoria are becoming strained, which is forcing policymakers to reintroduce social distancing measures and other restrictions—a pattern that is being repeated in other states as Omicron continues to spread. Other cracks are also emerging in Australia’s virus management systems; testing facilities are overwhelmed, and a large part of the country’s workforce has been forced to isolate after contracting COVID-19 or coming in close contact with a positive case.
The magnitude of Australia’s current outbreak will disrupt economic activity over the next 6–8 weeks. Consumer spending, particularly in offline retail channels, is likely to remain subdued as consumer mobility falls and demand for local services drops. Further, both B2C and B2B firms will have to contend with personnel shortages and breakdowns in their supply chains due to Australia’s strict quarantine requirements. While a return to national lockdowns remains unlikely due to the high vaccination rates in the country, state leaders are bringing back restrictions to contain the virus and protect local healthcare systems. Here, state-wise differences in attitudes toward reopening become important; states such as NSW and Victoria are maintaining a desire to stay open, while South Australia and Western Australia are adopting more cautious policies to protect their residents.
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