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Communicating the risks

Good morning! South Australia was plunged into a 7-day lockdown yesterday, the latest state to be hit by the ongoing Delta crisis that has plagued the East coast since late June. Victoria's lockdown was also extended for another week.

That means 65.5% of Australia's population is now locked down until at least Tuesday next week. 😬


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Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 recovered most of its losses last night, rallying 1.52% for no obvious reason, with US bond yields jumping 3.8 basis points to 1.22%. Locally, the ASX200 finished down 0.46% yesterday to its lowest level in a month, with mining and energy hit particularly hard after Monday night's decline in commodity prices, particularly oil.

A Dangerous Addiction: The Economic Affairs Committee of the UK's House of Lords warned that quantitative easing – large-scale bond purchases by a central bank – "has become a universal remedy for almost any macroeconomic setback", with numerous unintended consequences that central banks are largely ignoring.

Bubbles, bubbles everywhere: According to GMO chairman Jeremy Grantham, when the bubbles pop "There will be an enormous negative wealth effect, broader than it has ever been, compared to any other previous bubble breaking. It's the first time we have bubbled in so many different areas – interest rates, stocks, housing, non-energy commodities."

Lockdown, spend down: The Commonwealth Bank reported that spending in NSW for the week ending 16 July was 0.6% lower than it was in 2019, i.e. pre-coronavirus. Nationally spending was up 10.5%, well short of the average 17.5% increase seen so far in 2021 and that does not incorporate the most recent Victorian lockdown.

Inflation? Not in Japan: Japan's core consumer prices rose 0.2% in June from a year earlier. While that was the fastest pace in over a year, it's still low by global standards and was driven almost entirely by rising energy prices (+4.6%), particularly gasoline (+17.9%).

Afterpay strikes back: Just weeks after the Commonwealth Bank decided to enter the buy now, pay later (BNPL) space, BNPL giant Afterpay announced it was getting into banking, securing an Australian Financial Service License and partnering with Westpac to offer clients product advice and banking services.

Teething problems: Yesterday iron ore majors BHP and Brazil's Vale reported their second quarter results, with BHP reporting a 2% decline in the quarter compared to 2020 but full-year output was near the top end of its forecast range. However, Vale mirrored Rio's disappointing result, reporting problems at a new plant that caused shipments to come in at 75.7 million tonnes in the quarter, below the 78 million tonnes expected by analysts tracked by Bloomberg.

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Communicating the risks

If there has been an overarching governmental failure this year (in 2020 it was clearly the botched vaccine ordering process), it has been a failure to communicate the risks of the various vaccines against the risks of not getting vaccinated.

Stepping back: Last week the Australian Technical Advisory Group on Immunisation (ATAGI) recommended that the standard 12-week interval between the first and second doses of AstraZeneca be reduced to 4–8 weeks for people located in the worst affected areas. It also deemed that people under 60 in an outbreak area "should reassess the benefits to them and their contacts" from getting vaccinated with AstraZeneca.

That decision was merely the latest shift in the moving sand that is ATAGI's advice. Other than fuelling vaccine hesitancy through uncertainty, this time the advice actually runs counter to medical evidence from overseas – namely that a single AstraZeneca dose still confers high levels of protection and the longer you leave the second dose, the better.

Chart showing the effectiveness of a single dose of AstraZeneca.
The AstraZeneca vaccine is still pretty good with a single dose. FT

The protection offered by single dose of AstraZeneca seems to peak at around 12 weeks – in line with ATAGI's 'standard' advice. Worryingly, receiving a second dose in the 6-7 week range – within the range of ATAGI's new advice for COVID-19 'hotspots' – actually results in the worst possible vaccine efficacy.

Chart showing the best time to get a second dose of AstraZeneca.
The worst time to get a second dose of AstraZeneca is 6-7 weeks after the first. FT

Finally, advising only those in a current outbreak area to reconsider AstraZeneca is unlikely to do much good, given that it takes at least a couple of weeks for a vaccine to provide protection. In other words, once there's an outbreak it's already too late.

Why this matters: According to ATAGI, the risk of developing a blood clot from the AstraZeneca vaccine for the most at-risk group (aged under 50 years) is 0.003%. Given the clots are medically treatable, the odds of dying from the AstraZeneca vaccine for someone aged under 50 is just 0.0001%, or one in a million. That's around 10 Australians if everyone aged 18-50 was vaccinated with AstraZeneca.

As we've previously covered, hotel quarantine fails every couple of weeks. It was inevitable that at least one of those failures would become an outbreak, even more so once the Delta variant emerged. The multi-billion dollar question is then: why is ATAGI's advice disproportionately weighted towards the infinitesimally small risk of blood clots – which might kill tens of Australians – instead of the far greater odds of a COVID-19 outbreak, which could kill many more and (knowing how politicians will respond) plunge millions of others into costly lockdowns?

The Wrap Up

  • 🏅 Toshiro Muto, chief of the Tokyo 2020 organising committee, did not rule out an 11th hour cancellation after the 67th case of COVID-19 was reported among those accredited for the Games. 2 days to go...
  • 💸 The Australian taxpayer forked out a total of $A380,000 over 34 days to fly Mathias Cormann around Europe during his successful campaign to lead the OECD [PDF].
  • 🐱‍💻 The Australian, US, UK and Japanese governments accused China of hacking Microsoft Exchange email server software that compromised tens of thousands of computers around the world earlier this year.
  • 🥕 Former US President Donald Trump reckoned that if George Washington and Abraham Lincoln "came back from the dead" and ran on the same ticket, he would still beat them in an election.
  • 🍁 Canada will reopen its borders for fully vaccinated travellers from the US on 9 August, now that nearly 70% of Canadians have received at least one dose of a vaccine.
  • 🚀 Jeff Bezos became the second billionaire to ride his own rocket to the edge of space this month, "an 11-minute hop from west Texas to beyond the Karman line and back again".
  • 💩 In 2020, 55 out of 61 Texas beaches tested by environmental regulators were potentially unsafe for swimming on at least one day due to excessive "faecal indicator bacteria levels".
  • 📊 Denominators matter – "If you see something like x% of the sick/hospitalised/deceased were vaccinated, the better the vaccine uptake the scarier this number will seem! It is using the wrong denominator."