The Federal Government has raised the spectre of a more virulent mutation of COVID-19, leading to the reintroduction of nationwide restrictions in its budget documents.
The economic forecasts have been made on the assumption that further major outbreaks of COVID-19 occur later this year.
The budget papers describe two possible scenarios, the first being grimmer.
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"In this scenario, a more virulent variant of concern emerges in the middle of 2022," the papers read.
"This outbreak coincides with the winter flu season and is assumed to lead to higher numbers of cases for a longer duration and more severe illness than the initial Omicron wave.
"As a result, at the peak of the outbreak, workforce absenteeism returns to levels similar to those experienced in January 2022."
The budget papers describe the reintroduction of restrictions.
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"It is assumed that baseline public health measures such as physical distancing and density limits are imposed nationally to manage the increased health risks for the duration of the outbreak.
"Precautionary behaviour, such as reduced social mixing, and the direct impact of activity restrictions would result in weaker consumption and higher household savings than in the forecasts."
Under that scenario, unemployment would be 0.25 per cent higher than the current projection.
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The second scenario is more optimistic.
"In this scenario, it is assumed that vaccines, new treatments and rising levels of immunity result in fewer cases and a more stable health environment than assumed in the forecasts," the budget papers read.
The papers also forecast the January Omicron surge, as well as the east coast floods and high petrol prices, will dampen consumption this quarter.
But those impacts are projected to recede.
"Real-time indicators suggest that the impact of the Omicron wave on consumption has been temporary and muted compared to previous waves," the papers state.
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The high-spending budget features a series of cash splashes designed at blunting the impact of rising prices.
Six million Australians will be eligible for a one-off $250 payment to be paid next month.
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