Omicron won’t hold back consumption for long

The Omicron has lifted new virus cases to a record high, though hospitalisations remain low.  We estimate that there are around 2000 hospital beds available for Covid-19 patients in New South Wales, where cases are rising most rapidly, of which only 300 are occupied. A similar number should be available in Victoria. So far, the authorities are responding with mild restrictions, including mask mandates and QR check-ins. More draconian restrictions on activity could reverse the recovery in spending. But with the household savings rate reaching an eye-watering 20% in Q3 and consumer confidence holding up, it is only a matter of time before consumption bounces back in earnest. Our forecast that consumption will rise by 8% next year is well above the analyst consensus of 4.8%.