CoVid-19 and the Australian economy: observations on recent data points

August 26, 2021


Yesterday I participated in a discussion with a group of advisors and investors on the topic of CoVid and the current economic environment.

I benefitted from the information and opinions shared by a number of wise people, and thought I should share some of my take-aways in case it might be of benefit to others. I welcome your observations and additional reference points.

Ric Deverell (Macquarie chief economist) was kind enough to provide some chart backing to part of the discussion – I have poached some of his content (with permission). The data provides hope and perspective.

Australia’s COVID vaccination hope is well founded

  • Evidence that mass vaccination works well in terms of significantly reducing the severe impacts of CoVid on a nation (vastly reduces hospitalisations, deaths etc.)
  • The best case study of this is Canada which has high vaccination rates and did it with similar tools and at similar speed as Australia is doing right now – it has a lower daily CoVid deaths per capita rate than NSW has right now
  • It is true that vaccine efficacy fades, but evidence exists (Israel) that boosters are a mitigant
CoVid-19 cases vs. fatalities UK, Canada: despite rising case numbers, fatalities have remained reasonably low in countries where vaccination rates are high.
CoVid-19 indicators in high vaccination US states: similar pattern of low fatalities despite rising cases.

It seems reasonable to assume that Australia will achieve the high vaccination rates our politicians are setting as the bar for reopening

  • Australia’s vaccine hesitancy has reduced very significantly, with evidence that more than 80% of people have been or are planning to get vaccinated, and another ~10% open to it (“uncertain”)
  • Most similar developed countries have now made it to our target levels, or are close to it
CoVid-19 vaccine willingness Australia vs. US; Canada’s vaccination trajectory

Australia’s vaccination program is now at lightspeed – and there is reason to be hopeful we will hit the targets fairly quickly

  • Our vaccination rates are now up there with the most rapid programs we have seen globally to date
  • NSW current rate is equivalent to ~7% of the population per week receiving a jab
  • If NSW continues its trend it will be at 80% single-dosed in September and 80% double dosed in October
Rate of vaccination (flow) of various countries; Cumulative vaccinations administered in Australia on % of pop basis: Australia’s vaccination roll-out is on par with world-best, predominately thanks to NSW.
Canada vs NSW cumulative vaccinations on % of pop basis; Australia vaccination share by age cohort

The net economic impact of CoVid plus government stimulus has been surprisingly mild globally, and for Australia

  • World GDP already above pre-CoVid levels, and recovery appears to have more to run
  • Many key economic measures registered less severe, or less protracted, shocks than that of previous recessions, with the GFC a great comparison point
Global GDP data points: CoVid-19 recession was sharp, but brief.
US investment data points: CoVid-19 had a far more mild and brief impact than what we saw in the GFC.
Australian GDP and employment data points: recovery complete, with GDP and employment metrics already exceeding pre-CoVid-19 levels

In Australia, it seems reasonable to assume that once current lockdowns end the economy will bounce-back quickly (again)

  • The fears that “this time it is different” are probably unfounded
  • Overseas and in Australia we tend to see a consistent bounce-back after each lockdown
  • Victoria is a great experiment on the impact each time there is a lockdown and so far the bounce-backs have been fairly consistent
  • A number of metrics appear to suggest that Australian consumers are “seeing through” the current lockdowns, with house prices being a fairly good sentiment proxy (price growth continues)
Australian mobility and dwelling data: evidence suggests we should expect a good bounce-back post lockdowns (again)