The COVID-19 path is turning a corner but there are still huge challenges ahead. 2021 will be another year where lifestyles and the economy will be dominated by COVID-19
This is the nineteenth time I have written about COVID-19 since early February 2020 but I have not written about it since September. In those early months , my key perspective was that we were under-estimating the impact that COVID-19 would have, both here in New Zealand and globally, and that some of our responses were too slow. I also saw a need, in an environment when people were looking for certainties, to articulate the uncertainties.
For a while, things looked real wobbly as the Ministry of Health was poorly organised and there was confusion until late March as to whether New Zealand would aim for elimination or simply flattening of the curve. The Level-4 lockdown came only just in time. The full story of the debates within the Ministry of Health, and exactly how the Prime Minister came to make the subsequent decision for elimination, has yet to be told. It could well have gone the other way.
By September, the key issue in NZ seemed to be underestimating the risks associated with an increasing proportion of returnees who would be COVID-19 positive. So I wrote about that. Thereafter, I saw no great need to say much more. It was just a case of waiting for the Northern Hemisphere winter to play out, with inevitable impact. And that is where we are at right now.
The path ahead is now about to turn another corner. In Western countries, the death rate should peak in coming weeks and then decline as a response to a combination of rising vaccination rate plus some ongoing lifestyle restrictions.
Accordingly, In Western countries and the more developed Asian countries there should be a markedly increasing but far from complete level of population immunity prior to mid-year. The rest of the world will still be vulnerable.
Ironically, while much of the Western world will be in a recovery phases by mid-year after a very difficult first quarter, here in New Zealand there will be less change. The key COVID-19 issue in New Zealand will still be the risk of community transmission from international returnees.
In particular. the societal consequences of any escape of the disease into the community, with population immunity in New Zealand likely to be six months behind America and Europe, will remain profound. The Victorian experience in Australia should not be forgotten.
One key issue that has yet to be determined is the length of protection from the various vaccines. My current bet is that protection will be dropping significantly within a year and that annual revaccination will become the norm if population immunity is to be maintained. With luck it will be two years or perhaps even five years before a booster injection is required, but only time will tell.
One of my friends who was sick from COVID-19 way back in March is still producing high levels of antibodies and is donating plasma every few weeks. That is a promising indication that vaccines can also be long-lasting.
Although the virus has long been eliminated from his system, unfortunately my friend still has elements of systemic malaise as well as antibody production. That malaise is a reminder that the effects of COVID-19 can be far from trivial, even for those who do recover.
There is lots of confusion about the relative merits of different vaccines. From the outset, I have had particular faith in the Moderna and Pfizer-BioNTech vaccines based on formulation of messenger RNA (mRNA). As soon as I saw the initial Moderna results back in May, with strong antibody responses in humans combined with no serious health effects, followed by data on disease efficacy in monkeys, then it seemed to me that the key elements of the big picture were in place.
Using mRNA in this way is a remarkable new technology. It presents as a pathway to the future, not only for COVID-19 but also for all the other viral diseases.
Other vaccines using more traditional technologies will remain important for COVID-19. That includes the Oxford-AstraZenica vaccine, the Russian Sputnik vaccine and the somewhat maligned CoronaVac from Chinese Sinovac. Anything over 50 percent efficacy can play a useful role in the global halt of the disease, but it is the mRNA technology that is the pathway to the long-term future. The Moderna vaccine does seem to be one step ahead of Pfizer-BioNTech in that regard, given the less stringent freezing requirements.
If there is any justice, then the researchers behind Moderna and the Pfizer-BioNTech vaccines will be Nobel Prize winners for medicine. More important, they will be hailed as global heroes for finding the new path to vaccine development.
The debate here in New Zealand has recently been focused by Minister Hipkins’ statement that although New Zealand visitors may be required in future to be vaccinated, the same requirement for returning New Zealanders might breach the Bill of Rights. The issue goes to the core of returnee rights relative to the rights of local citizens to be kept safe.
At some stage the Government may also need to reconsider the charging system for quarantine. Currently, any New Zealander who was overseas at 12.01am on 11 August 2020 does not have to pay anything unless their return visit is short-term. The time may also come when those who have been vaccinated require a less stringent quarantine than those who have not.
My reckoning is that the broader New Zealand economy will function reasonably well this year as long as COVID-19 can be held at the border. The exceptions will be those sectors that are dependent on international tourists and international students. The house construction industry will continue to boom with Kiwi returnees plus ‘fear of missing out’ creating ongoing demand, but house building will continue to be limited by land availability.
A significant driver for New Zealand’s economic growth will continue to be spillover from China’s growth. I expect China to become even more important as an export destination unless New Zealand gets caught in geopolitics. If that should happen, then all bets are off and a substantial recession would be inevitable.
There are only two Western countries that rely heavily on China as export markets. Those countries are Australia and New Zealand. It is a natural outcome of geography and resource endowments.
Australia is somewhat protected in that China has no alternative to Australian iron-ore. New Zealand also has some protection in that China has no alternative sources for whole-milk powder. However, we would not want to test that shield.
The mainstream economics view is that inflation is benign and likely to remain so, but that is not quite how I see it. Economists rely very much on rear-vision mirrors.
I have done my share of talking around in recent weeks and I have heard plenty of evidence from people in the trades who are increasing their hourly charge rates. Minimum wages also go up by more than five percent at the end of March. Right now, it is only the value of the New Zealand dollar as measured by the high trade-weighted index (TWI) that is keeping the lid on overall prices.
A big question for 2021 is where will the sustainable growth come from? The monetary pump cannot go on forever. The long-term economics look challenging as New Zealand tries to deal with fundamental inequality, lack of fairness and environmental constraints.
As for the Olympics, I expect that they will be cancelled. The alternative will be an Olympics without spectators and with athletes having to quarantine on return. That should remind us that it is going to be another year dominated by COVID-19 and its consequences.