Federal Treasurer Josh Frydenberg has urged Australians to remain optimistic about the economic rebound, claiming the national plan has factored in scenarios of new variants emerging.
The comments made by the Coalition's money man come after the S&P/ASX200 Index slumped 1.1 per cent at the open, after jitters prompted sell offs in travel and aviation stocks following confirmation of the new Omicron variant over the weekend.
Australia's leading index regained some ground, however ended the session down 0.5 per cent to 7239.7.
Mr Frydenberg said the country's high vaccination levels and the early start to a booster program would assist in protecting Australia from a new strain and reducing the risk of re-implementing restrictions which would dent the economic recovery.
"With more than 86 per cent of Australians being double vaccinated Australia is well positioned to deal with the ongoing threats from COVID-19," the Treasurer said.
"Australia's economic recovery is well under way with more than 350,000 jobs coming back since the start of September."
Mr Frydenberg also noted updated forecasts regarding the economic outlook would be updated at the mid-year economic fiscal outlook, which is expected to drop in early December.
Westpac currency analyst Sean Callow said the emergence of the Omicron causing the Australian dollar to near three month lows, with knee-jerk reactions by governments rattling currency markets.
"The knee-jerk responses by governments such as the UK to block flights from southern Africa and even impose restrictions on flights from elsewhere cast a cloud over the services sector recovery," Mr Callow said.
Australia's third-quarter gross domestic product figures are expected to be released this coming Wednesday, with Westpac's economic division anticipating a contraction of 2.5 per cent due to Delta restrictions encompassing the majority of the quarter.
ANZ expects GDP to fall 2.7 per cent over the period.
"We know that recovery is under way, but Q3 GDP will show us how deep a hole the economy was in before reopening," Mr Callow said in his economic note.
"October retail sales offered some encouragement for Q4, up 4.9 per cent (over the month), but the harsher the response by Australia's federal and state governments to Omicron, the weaker the summer economic rebound."
The RBA forecasts GDP for 2021 to grow 3 per cent, 5.5 per cent over 2022 and 2.5 per cent over 2023.
The latest business indicators survey from the Australian Bureau of Statistics showed inventories over the third quarter declined 1.9 per cent as a result of lockdowns, however company profits over the period were up 4 per cent.
ANZ noted the results were unclear on the impact it would have on GDP.
Sign up for our newsletter to stay up to date.