Effects of COVID-19 strains on the Australian economy

COVID-19 has had a profound impact on the Australian economy since arriving in Australia in January 2020. Measures to reduce the spread (e.g. social distancing, commercial trading restrictions, and stay-at-home orders) have had varying impacts on economic activity.

The most noticeable impacts were driven by two COVID-19 variants: the L-strain of the virus which arrived in Australian economy in January 2020, and the Delta strain which was first detected in June 2021. The impact of these variants on macroeconomic aggregates are explored below and compared to the Omicron variant outbreak of COVID-19 in the March quarter 2022.

COVID-19 (L)

The arrival of the L-strain of COVID-19 triggered an Australia wide lockdown on 23 March 2020. The first major round of restrictions included temporary closures of pubs, clubs, cafes and restaurants, with various other service providers following shortly after. Many workplaces advised their employees to work from home where possible. Household social distancing measures were put in place, with the most severe restrictions being that gatherings were restricted to two people. Restrictions began to ease across the country between late April and early May of 2020.

A surge in COVID-19 cases in Victoria triggered the state to go into a second lockdown on 8 July 2020, with stage 4 stay-at-home restrictions introduced in August. There shorter lockdowns enforced in Queensland, Western Australia and South Australia.


The emergence and subsequent rapid spread of the Delta strain in June 2021 triggered various lockdowns across all states and territories, with Victoria, the ACT and NSW enduring the longest, strictest restrictions. Leaving home only permitted for essential reasons and mandatory mask wearing enforced. Polymerase chain reaction (PCR) testing ramped up, and national and state governments strongly encouraged Australians to get vaccinated. Targets for vaccination rates set across states and territories with the incentive of easing restrictions and ending lockdowns when these targets were met.


The Omicron variant was first confirmed in Australia on 27 November 2021 when the nation had high vaccination rates. Despite the increasing rate of infection, federal and state governments did not introduce new lockdown restrictions and travel and trading restrictions gradually eased.

Household and business income support
To support household and businesses, Governments provided subsidies and other payments over the course of the pandemic.

The lockdowns and trading restrictions following the L-strain outbreak led to record falls in hours worked and private compensation of employees. Workers laid off or put onto reduced hours as businesses closed or reduced operations in compliance with health mandates.

The Commonwealth Government subsequently Australian economy introduced the JobKeeper and Boosting Cash Flow for Employers programs to support businesses and employees in their employment. Subsidy payments contributed to the 12.1% increase in operating surplus in June quarter 2020. Household gross income further supported by social assistance benefits in cash, such as the Economic Support Payment and Coronavirus Supplement.

The JobKeeper and Boosting Cash Flow for Employers programs ended prior to the emergence of the Delta strain. Support through the Delta variant was provided for locked down states through Commonwealth and State government co-funded business support programs. Direct wage support reduced in the absence of JobKeeper. The COVID-19 Disaster Payment was the main support payment for households, assisting those unable to earn an income as a result of local public health orders.

The level of subsidies provided through the Omicron outbreak was lower. Governments focused on removing or Australian economy lessening trading restrictions, whilst underlying demand improved. The Pandemic Leave Disaster Payment introduced to support workers. Who lost hours due to being forced to isolate in compliance with health regulations. These payments were less material than COVID-19 Disaster Payments during the Delta strain due to the lack of lockdowns.

Household consumption

Household spending patterns changed significantly over the pandemic and across the different COVID-19 strains.

Discretionary spending was more impacted by COVID-19 containment measures than expenditure on essential goods and services. Spending on discretionary services declined significantly during. The L-strain and Delta outbreaks of COVID-19, as movement and trading restrictions restricted access to dining out, recreational and personal services.

By contrast, discretionary spending on goods increased as consumers spent Australian economy more time at home and could not travel. Many retailers of household and recreational goods mitigated. The impact of mobility restrictions through the use of online platforms to reach housebound customers.

As the pandemic progressed, spending on essential goods and services returned to more pre-COVID levels. The emergence of the L-variant saw panic buying of food. Spending on food remained elevated through the Delta strain, as access to hospitality businesses remained restricted.

The outbreak of the Omicron strain of COVID-19 did not affect household spending to the same extent as the L or Delta strains. Unlike the previous strains. The Omicron variant did not result in lockdown actions and there were high vaccination rates across much of the country. The removal of mobility and trading restrictions enabled shopfronts to operate regular trading patterns, and consumer demand remained strong.

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