Severe recession, huge debts: Australia's Covid-19 strategy

According to the Centre for Disease Control, flu vaccines have only limited effectiveness. Because such viruses undergo frequent genetic changes (and corona viruses do the same), the flu is endemic. During seasons when the flu vaccine viruses are similar to circulating flu viruses, the vaccine can be moderately effective. Flu vaccine has been shown capable of reducing the risk of a bad flu by 40 – 60 percent.

Seasonal flu vaccines are only designed to protect against infection and illness caused by the three or four most common influenza viruses. During years when the flu vaccine is not well matched to circulating influenza viruses, it is possible that little or no benefit from flu vaccination may be observed. This limitation may well apply to any corona virus vaccine that is developed.

A sobering message comes from Dr Michael Ryan, executive director of the WHO's Health Emergencies Programme. Dr Ryan warned that Covid-19 "may become just another endemic virus in our communities, and this virus may never go away"....."I don't think anyone can predict when or if this disease will disappear," he said.

The bottom line is that it is inevitable Australia will experience further resurgences of Covid-19 cases. The $500 billion that Australian governments are throwing directly and indirectly at this disease (which to date has killed barely over a 100 (mainly sick and elderly) Australians, would almost certainly save countless more lives had it been spent on other areas of public health. If there are many later (more serious) breakouts of Covid-19 after our borders reopen, then the current strategy is postponing and not preventing a big rise in infections down the track.

The economic effects of government policies to counter Covid-19 (especially shutdowns) have been disastrous for many areas of the Australian economy. Travel and hospitality (in particular) have been severely hit, and a lot of businesses are going bust. Unemployment is swelling. Consequently the banks are bracing for a surge in distressed borrowers and bad debts. Deferred loans on mass scale could be a financial time-bomb waiting to go off.

According to the Treasury, the Government's economic support package amounts to $259 billion. This is equivalent across the forward estimates to 13.3 per cent of annual GDP, and direct fiscal measures are equivalent to around 6.9 per cent of GDP. The IMF says that Australia's economy would likely be one of the worst-hit economies in the Asian region, predicting it would shrink by 6.7 per cent this year. The crisis has already proved far worse than the global-financial-crisis-led recession of 2009, and will add $500 billion to government debt this decade. In Australia, Commonwealth and state indebtedness will rise, between this year and next, by more than $40,000 for each working-age adult.

While all this has been happening the government has slipped in more (unrelated new) spending, including $270 million more defence spending, and plans to bring forward income tax cuts. There are continuing calls for even more government support, especially from the opposition and unions.

The most common demands are to extend the Jobkeeper subsidy until at least December, permanently raise income support for the unemployed, and introduce "pandemic leave". Five million Australians on lower incomes will soon receive the Federal Government's second $750 Economic Support Payment, while employers will shortly receive the second instalment of the tax-free Cash Flow Boost (totalling between $20,000 and $100,000, depending on PAYG withheld, over 2020).

Under measures announced by the Australian Government, individuals were allowed to apply to take out up to $10,000 of their super in the 2019-20 financial year and another $10,000 in the 2020-21 financial year. Almost half a million Australians have completely emptied their retirement nest eggs, according to Industry Super Australia. It also estimates that 395,000 of those who have wiped out their funds are under the age of 35. Public service and military funds have already released $169 million in early superannuation, despite public sector workers being secure in their jobs.

The government can't keep paying Jobkeeper and double dole indefinitely. Similarly, it is naive to think that the airlines, foreign tourism, and other sectors can be subsidised for years. Deferring rent or loan repayments is also problematic. If people can't pay their bills now, they probably won't be able to pay them in three or four months' time either.

So what is the future likely to bring?

If we fast forward to the end of 2020, with current policies I can't see Australia having a much lower Covid-19 prevalence than now. It is also becoming clear that it is the lockdowns that are causing major economic damage. Targeted quarantine and testing are costing little by comparison. The public is already fed up with lockdowns and this approach will have to be abandoned completely on the grounds of cost and public intolerance. That said, the public and the government are both used to panicking whenever new cases soar.