“Down down, you bring me down, I hear you knocking at my door and I can't sleep at night
Your face, it has no place, No room for you inside my house I need to be alone”
'I am the Resurrection' by the Stone Roses, 1989.
Source: Lyricfind. Copyright: Universal Music Publishing Group.
Australia is facing its deepest economic chasm, caused by Covid-19 virus which forced the country and much of the world into lockdown. Local data, coupled with international experience, suggests lockdown is working to slow viral transmission, and we are moving the dialogue quickly towards an exit strategy.
It appears at this stage that through some combination of ‘tyranny of distance’, low population density, relatively uncrowded homes, a low viral load at lockdown, seasonal impacts, a prepared medical system or simply because we are the ‘Lucky Country’, Australia has fared well. We did not act as swiftly as we could (#bondi), and early messaging was confused, so it is hard to attribute it to great management, whatever is claimed ex post.
What comes next?
To date, it was possible to analyse the outbreak as an advanced mathematical problem. Now, our policymakers are faced with huge challenges ethically, socially, economically and politically, until they are rescued by medical science or favourable mutation.
These challenges are fourfold:
- Determining an acceptable post-lockdown death rate (ethical)
- Encouraging or enforcing lifestyle changes to slow viral transmission (social)
- Ascertaining how we pay for committed stimulus and economic rebuild (economic)
- Creating a vision for the future within this window of public endorsement (political)
Addressing these in turn:
1. What is an acceptable post-lockdown death rate?
This is the tricky ethical question our leaders are forced to deal with. It is critical to setting a date to exit lockdown, which in turn is critical for our economic recovery.
We cannot eradicate the virus unless we keep our borders closed forever. Hence, we will be faced with a reality that there will be deaths from COVID-19 into the future.
For what it’s worth, my simple, reductive model has about 1-5 deaths per day forecast in Australia for the first half of May, which seems like the earliest we may consider easing lockdown. This question is not an easy one to propose an answer for.
2. What changes do we need to make to our lifestyles?
The concept of exponential growth has been brought to light to non-mathematicians by the rapid spread of COVID-19 and the terrible death rates we have seen so far in places like Italy, France, Spain, US, UK, China, Iran, and increasingly much of Europe.
The concept R0 – the basic reproduction number - of a virus, tells us how many people a carrier infects. To keep a virus in check, we need to keep R0 at, or below, 1.
Immediately prior to lockdown, R0 may have been around 3 in Australia. We therefore needed to reduce and retain the rate at which COVID-19 spreads post lockdown by about two-thirds, which at this stage, we seem to have achieved.
The concepts of social distancing, self-isolation, work from home, and increased hygiene are a start. It is likely we will need to regulate capacities of venues such as bars, restaurants and transportation in future.
We will likely need to keep our borders closed for longer. Viruses do not respect national boundaries, and we cannot control the actions of other countries.
It is vital that we carefully monitor and test the prevalence of the virus in the community post any re-opening: prepare for random, compulsory testing. This is for everyone’s good.
Simply put, the clear lessons of the past few weeks will need to be learned, and applied, or we will end up with a lethal second wave.
3. How do we pay for the stimulus?
Politics and religion are taboo subjects based on strong ideologies. In recent weeks our budget-balancing government has been forced to throw their core belief out of the window.
The cost of this lockdown falls squarely on future Australian taxpayers, who have funded the averting of a potential social catastrophe by attempting to re-allocate some of the pain.
It is likely that further government spending will be required to build confidence as we come out the other side.
The key to recovery is getting people back to work, but with attempts to manage lower person to person interactions, federal and state projects can help to smooth the path.
4. What is the vision for the future?
This is our trillion-dollar question.
The public has committed hundreds of billions of dollars already to support the lockdown, and now is the time to be repaid with a grand vision for the future. We will tip in some more for that to become reality.
Now is the chance to invest in a modern communications network to replace our antiquated NBN; now is the chance to develop high-speed rail to connect our major cities; now is the chance to build renewable energy generation capability, and infrastructure to mirror our European counterparts; now is the time to embrace electric and autonomous driving, to push the boundaries of medical science, to create the southern hemisphere’s Silicon Valley, to reform our tax system, to cut red-tape, and so on.
This must be grasped at all costs, or we have missed our big chance. There is a window, but a small one at that, where everyone is on the same team, fighting a war against a common, invisible enemy.
When we roll away the lockdown, we must not find an empty agenda
In summary, it’s a tough month or two ahead for our leaders, and it’s important we all play our part in staying at home until the restrictions are relaxed, then continue to focus acutely on reducing the spread of a virus that will still be present.
Douglas Isles is Investment Specialist (Retail) at Platinum Investment Management, although this article is written in his personal capacity. He is also a member of the Actuaries Institute COVID-19 Working Group.