Westpac economists have warned there will be no recovery for tourism this year.
The bank’s latest Economic Overview forecasts say self-isolation requirements remain too prohibitive for all but a handful of visitors.
Westpac acting chief economist Michael Gordon said visitors staying longer, including international students and migrants, would likely return in greater numbers, but the country’s previously largest export earner was not expected to make any such recovery.
But there would be a silver lining to this continued absence because the lack of tourists would mean less demand for everyday goods like food and petrol, which could help keep inflation rates in check.
In its previous Economic Overview three months ago, Westpac predicted a far stronger recovery of tourism than it does today.
Another worrying trend highlighted in the Economic Overview was wage prices inflation. Previously an issue for those recruiting in specialised roles, Westpac now says wage inflation is likely to spread to more general roles as well.
“We expect wage increases will become increasingly widespread over the coming year as the tight jobs market allows workers to press the case for cost-of-living adjustments (or more),” the report said.
Gordon said if wage rise demands became too rife, producers would have to recover the costs by increasing the costs of their goods, which could lead to more workers demanding higher wages as the cost-of-living increases.
“We expect that economic growth will remain sluggish through the early part of 2022, but that conditions will firm through the latter half of the year as the Omicron-related disruptions fade,” the report read.
“Against this backdrop, the labour market is expected to remain very tight, with unemployment on track to fall to just 3 percent over the coming months.”
Westpac acting chief economist Michael Gordon
