New Zealand and most Australian states and territories have essentially eliminated coronavirus, resuming business and public events with some changes to keep people safe.

Key points:Many indicators of New Zealand’s domestic economic activity are now back at or above pre-pandemic levelsBut NZ is expected to take a much bigger initial economic hit from COVID-19 due to its tougher lockdown and greater reliance on tourism than AustraliaBusiness leaders and Australia’s National Cabinet still maintain that an “aggressive suppression strategy” is the best way to deal with coronavirus

Economists are now joining public health experts in debating whether Australia’s model of suppressing community transmission of the virus will do more damage than attempting to kill it off.

“We have enough evidence to say it’s worth shooting for the moon, it’s worth giving this a go, we are at a point now where elimination is at our fingertips,” Alison Pennington, senior economist at The Australia Institute’s Centre for Future Work, said.

“The health experts are saying that we can grab this, we can move towards the success of places like New Zealand where their whole world is opening up for them.”

In March, New Zealand went into a lockdown that was among the toughest in the world.

New Zealand’s lockdown was even tougher than Australia’s, shutting most retailing and all restaurants and cafes.(AP: Nick Perry)

All schools were closed and all non-essential businesses, including large retailers, were shut. Supermarkets and pharmacies were open, but cafes and restaurants were shut — banned from even providing takeaway services.

States and territories outside of our most populous states, NSW and Victoria, have also effectively achieved elimination, despite slightly milder lockdowns than across the Tasman.

Until yesterday, Tasmania had gone more than 60 days without a new case, while other states have recorded little to no community transmission in recent weeks.

But soaring rates of community transmission in Victoria, described as a “second wave” of infections, have seen the reintroduction of restrictions that had been wound back in May.

School returned yesterday, but for most it will be by remote learning. Playgrounds, gyms and cinemas are shut. Coffee is takeaway only, Melburnians are not allowed to leave the city — and essentially their postcode — except for strict reasons. If you can work from home, you must.

Home of rugby, pavlova … and almost no restrictions

Meanwhile, across the ditch, New Zealanders are celebrating having almost no active cases. They are attending gigs, watching sport and getting back to a new normal.

The country’s level one restrictions mean physical distancing is encouraged, as is staying home and getting tested if you have flu-like symptoms, but there are no restrictions on gatherings, transport or business.

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“New Zealand took a very drastic approach, but for us that means that we have certainty to plan,” said Auckland-based Shamubeel Eaqub of Sense Partners.

The eminent economist said the Kiwi decision to shut its economy and eliminate the virus was the right one for his country.

“There is no easy alternative,” he observed.

“But what we have learned from the experience so far is going hard, going early, really getting on top of the disease, gives the best possible chance to opening things up and back to normal as much as possible.”

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The boss of Melbourne-based independent think tank the Grattan Institute said Victoria’s slide back into restrictions adds weight to switching Australia’s strategy from suppression to elimination — to avoid more “second waves” of infection and shutdown.

“The second wave in Victoria really highlights the potential costs of a suppression strategy,” Danielle Wood told The Business.

“While ever that virus is circulating at low levels in the community, there’s a risk of a second wave, and that comes at a very significant cost.

“If we look at other parts of the country, like Western Australia, that have effectively eliminated [the virus], they are at the point now where they are able to open their economy up, even though they’ve got to keep the border closed domestically.”

Opposition to elimination

There is substantial opposition to the elimination strategy. The Prime Minister thinks it would double the unemployment rate.

“You’re talking about hundreds of thousands of more people unemployed for a start, and other businesses closed and livelihoods destroyed, and then you’ve got to weigh that up against what it actually achieves,” Scott Morrison said at a press conference last week.

Australia’s National Cabinet agreed to start easing restrictions once the first wave of the virus had been supressed.(ABC News: Luke Stephenson)

“It is a very risky strategy and one that can be very illusory,” he added, because Australians will keep returning from overseas, and exports and imports need to continue through vessels with crews that are coming from overseas.

The position of the National Cabinet remains an “aggressive suppression strategy” for the virus.

“If you get to elimination as a result of this process, well, well and good,” Mr Morrison added.

“But you can’t mortgage off your economy for what would prove to be a very illusory goal by that process.

“That is certainly the health advice that I have and it’s certainly also the economic advice I have.”

New South Wales Premier Gladys Berejiklian thinks eradicating the virus in Australia is a pipe dream.

“Whilst we would all love to adopt a policy of elimination, it’s, I think, unrealistic to assume we would get there,” she said last week.

“In fact, very unrealistic. Suppression is definitely the right strategy.”

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Business groups argue it would be a form of commercial suicide.

“The elimination strategy would be incredibly destructive for our economy, both now but also importantly for the years ahead,” Ai Group chief executive Innes Willox said.

The lobby group represents thousands of businesses and it argues eliminating the virus is simply not achievable.

“To put a big stop into the economy would mean, for many businesses, quite simply that they wouldn’t reopen,” Mr Willox said.

“They wouldn’t re-employ at the same level and they’d be dealing with ongoing uncertainty for much longer than just a stop period.

“We don’t want to go through a scenario where we just hack off a third of our economy in the hope that we can eliminate it, knowing that it will still be prevalent in the rest of the world.”

How does it all add up?

The hardest part might be that we cannot know if we can succeed in eliminating community transmission of coronavirus unless we try.

Critics of the strategy note that New Zealand’s gross domestic product (GDP) is set to fall almost 9 per cent this year, whereas Australia’s is predicted to fall by a smaller amount, closer to 5 per cent.

Notably, more than 20 per cent of New Zealand’s GDP is from tourism — and the international travel industry is currently grounded. Australia’s tourism industry contributes about 3 per cent of our GDP.

Advocates of the elimination strategy point to a rapid bounce-back in New Zealand’s economy post lockdown.

After plummeting by half or more during the lockdown, NZ consumer spending is back around pre-pandemic levels.(ABC News: Alistair Kroie)

Consumer spending, job ads and the volume of traffic on the roads — all of them are now higher than before the pandemic hit.

The number of jobs being advertised in NZ is now back around pre-pandemic levels.(ABC News: Alistair Kroie)

The Australia Institute’s Alison Pennington says the New Zealand example — and most states and territories eradicating community transmission — shows elimination can and should be the aim.

“As we we’ve seen in Victoria, it’s very, very hard to suppress this virus,” she said.

“There’s no ‘low level’, bubbling level of infection that is easy to contain.”

Ms Pennington argues that — with no vaccine on the horizon — a successful elimination would give businesses and consumers confidence currently being sapped by uncertainty about future flare-ups and subsequent restrictions.

Alison Pennington says “people will continue to feel uncomfortable, anxious and lack confidence” while the virus is circulating.(ABC News: John Gunn)

“It doesn’t matter how much various interest groups push to say that the virus is ‘going to have to be part of our lives’,” she said.

“The fact is people will continue to feel uncomfortable, anxious and lack confidence [while the virus remains in the community] and that goes for business, for investment and it goes for people being able to get out there and do their jobs because they’re fearful of contracting the virus.”

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A hard shutdown in our most-populous state would have a price-tag of billions, but would we make it back — and more — if we could remove that uncertainty?

Economist Shamubeel Eaqub said elimination meant his country avoided a situation akin to the Great Depression of the 1930s, in favour of a deep — and still-difficult — recession.

“But New Zealand is going to do better than most other parts of the world because we’re not going to be left under a cloud of fear,” he said.

“We can go about our business within our home borders … pretty much back to normal.”

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