Every option is terrible
By Justin Pyvis – Delivered on 21 Oct 2021

Good morning! NSW Premier Dominic Perrottet was at it again yesterday, splashing the cash on more vouchers, this time $A50 for every adult in the state to spend on a local hotel from March 2022.

The voucher scheme was part of an even bigger tourism package which included a $A60 million fund that will be "aggressively in the market" for international travel, specifically to get international airlines to offer more flights to Sydney. According to Perrottet, that was a key reason for the abolition of hotel quarantine as "no one is going to travel to Australia if you've got to sit in a hotel for two weeks, and you can't leave".

Fair enough: NSW appears to have moved completely away from COVID-19 policy being set by the secretive "best health advice" we've become so accustomed to over the past 18 months, to now being solely focused on the economy. Some middle ground transition might have been nice but that's never much of a political winner.

Moving on, Queensland Premier Annastacia Palaszczuk warned the unvaccinated yet again that they're running out of time to protect themselves. According to Palaszczuk, "The storm is coming, we need to be prepared… I can't help you unless you're on the lifeboat."

Dark! In all seriousness though, it's a better approach than a certain other Premier who is still "running blind" by refusing to provide people with a reopening plan, setting the state up for "a story of missed opportunities and significant delays... [that] will have lasting impacts".

Speaking of WA, yesterday its government made full COVID-19 vaccination mandatory for around 75% of the state's workforce by 31 January, including those in supermarkets, bakeries, restaurants, pubs, cafes, post offices, hardware stores, childcare, schools, financial institutions, petrol stations, accommodation facilities and building maintenance and construction.

That's one way to get your vaccination rate up. We're just not sure it's necessary: there's so much real estate between antivax and vax mandates that remains completely untouched by politicians, many of whom seem incapable of comprehending trade-offs.

Are the people of NSW (91.6% first doses) really that different from those in WA (71.9% first doses), or have the latter's political leaders simply failed at getting the messaging and incentives right, forcing them down the morally opaque vaccine mandate road?

Fully vaccinated population (aged 12+)


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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 finished stronger for a sixth consecutive day on Wednesday, rising 0.37% as solid corporate earnings continued to flow, easing fears about persistent inflation and stuttering output. A notable mover was Bitcoin, which hit new highs following the release of the ProShares Bitcoin Strategy ETF and quickly became the second-most-traded fund launch of all time.

Locally, the ASX200 added 0.53% following a strong lead in the US the night before, with gains for the banks, tech and industrial stocks more than offsetting a 1.0% decline in energy.


RBA bites back: The Reserve Bank of Australia (RBA) raised the cost of borrowing April 2023/24 government bonds from 0.25% to 1%, making shorting the bond much more expensive and helping drive the yield down closer to its 10 basis point target. When you own most of the product, it's pretty easy to fix the price. Now watch inflationary pressures move elsewhere on the curve (and into different markets).

China's slowing: The big question is whether Xi Jinping can avoid a hard landing, or resist the urge to light another fire under the sector. "Prices of new-built residential properties fell on average in major Chinese cities in September... The last time prices tumbled was in April 2015."

Possibly not transitory: Federal Reserve board member Christopher Waller said if inflation remains high for the rest of this year, "a more aggressive policy response than just tapering may well be warranted in 2022".

Red hot: Germany's industrial producer price index for September came in well above expectations at 14.2%, the biggest increase since 1974, mostly due to "the price increase of energy" (although excluding energy the index was still up 8.6%). 🥵

No acceleration, for now: UK inflation was 3.1% in September, slightly below August's 3.2%. However, it'll likely be a temporary respite – prices plateaued for five months after September last year (from now on any prices rises will be compounding off a flat base) and various government subsidies that suppressed price rises, such as the discounted 5% VAT rate on hospitality, have now ended.

How to create a shortage: Or a black market. Argentina's government froze the price of over a thousand household goods until early 2022, as it battles "to cool inflation that spiked to 3.5% for the month of September and is running at an annual rate of over 50%". Or, you know, they could just stop printing so many pesos.

Inflation is here: And people are worse off because of it. Consumer prices in Canada hit 4.4% in September, a new 18-year high. Supply shortages were blamed by Statistics Canada, but it's really a global demand problem on the back of easy money and big spending politicians – shelter costs went up 4.8% and the price "for just about every type of food" increased, especially meat which rose 9.5%.

Every option is terrible

Canadian/Kiwi economist Eric Crampton wrote an interesting article comparing Alberta (Canada, population 4.4 million) to New Zealand (population 5.1 million). Specifically, given that Alberta's pandemic policy has been to effectively 'let it rip' (it leads the country in COVID-19 infections "by a large margin"), he looked at how the province's ICU capacity is holding up.

Breaking it down: 85.8% of Alberta's 12+ population is fully (76.7%) or partially (9.1%) vaccinated, with the remaining 14.2% accounting for a whopping 87% of the 12+ ICU demand. If those 14.2% were instead vaccinated, "ICU demand would have been less than 12% of actual demand... The system wouldn't be busting".

Why this matters: According to Crampton, everyone's liberty is being restricted "to prevent the hospitals from being overwhelmed by the small proportion of people who do not want to be vaccinated". If just 15% of the eligible population refuse to be vaccinated, "as in Alberta, that 15% impose so much cost on the health system that you get horrible outcomes that deny hospital services to everyone, vaccinated or unvaccinated, for all the other things that send people to hospital".

Looking forward: "Every option is terrible" – without locking people down healthcare needs to be rationed because of the unvaccinated, whether it's telling them they won't have an ICU bed or "deferring cancer and other surgeries to save ICU space for the unvaccinated". One positive with the former option is "doing it this way might encourage more people to be vaccinated, and in doing so massively reduce the problem".

It's all about getting the incentives right – there's a lot of middle ground between 'letting it rip' and vaccine mandates that policymakers have barely scratched.

The Wrap Up
    🎾Immigration Minister Alex Hawke said men's world #1 Novak Djokovic will not be allowed into the country for the Australian open if he's not fully vaccinated against COVID-19.
    🔋Paying a green premium: mining giant BHP upped its offer for Canadian nickel miner Noront by 36%, outbidding Andrew 'Twiggy' Forrest's Wyloo Metals.
    🔓Chinese billionaire Jack Ma left China/Hong Kong for the first time in over a year, visiting Spain "for a study tour".
    🥝Queensland re-joined the Kiwi travel bubble, allowing travellers from the country's south island to arrive without quarantine.
    ⛏️Australia's biggest miner, Rio Tinto, pledged to halve its direct carbon footprint by 2030 (up from a target of 15%).
    👽Facebook's Mark Zuckerberg is expected to announce a name change for the company at its annual Connect conference on 28 October, if not sooner.
    🦗Former Australian test cricket star James Pattinson has retired from international cricket at the ripe old age of 31 due to persistent injuries.
    💉The US government will make COVID-19 vaccination available for children aged 5-11 "within weeks", with the vaccine to be available at paediatrician's offices, local pharmacies and potentially even their school.
    🤔A cyclist in Utah died after a car ran over him three times. Authorities do not suspect foul play, putting it down to driver incompetence.
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