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More carrot, less stick

Good morning! Victoria reported a fifth coronavirus case yesterday, a man in his 60's who has been linked to the existing outbreak. Authorities also confirmed that the outbreak is related to last week's South Australian hotel quarantine leak and is the so-called Indian variant.

New restrictions are in place and hopefully a lockdown is avoided, given the outbreak's known origins should make contact tracing more straightforward (although one of the positive cases attended the footy on the weekend 😬).

Markets

Daily % change

AUD/USD

77.5

0.0%

10Y Bond

1.64

-1.0%

ASX200

7,115

1.0%

Brent (bbl)

68.7

0.3%

Gold (oz)

1,901

1.0%

Iron ore (t)

184.0

0.7%

Bitcoin

37,661

-3.4%

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

The US S&P500 (-0.21%) edged down after home sales fell by more than people expected, along with a slight dip in the US Conference Board's consumer-confidence index in May, suggesting the reopening recovery isn't going entirely to plan.

Mighty iron ore: Goods exports to China in April increased by almost $A600 million (4%), with iron ore exports up $A234 million to a new record $10.5 billion. Iron ore volumes fell 1% but that was offset by a 4% increase in price.

US home sales: New home sales fell 5.9% in April (although rose 48.3% on a year-on-year basis due to lockdowns in 2020), with a very little inventory available, especially entry level homes. The number of homes available for sales is near a record low in data that date back to 1982.

US property prices: The US median new house price soared 20.1% year-on-year in April. The S&P CoreLogic Case-Shiller 20-city home price index jumped 13.3% in March compared with a year earlier – the biggest such gain since December 2013. Nobel prize-winning economist Robert Shiller said: "In real terms, the [US] home prices have never been so high. My data goes back over 100 years, so this is something."


Analysis

More carrot, less stick

A lottery helped in Ohio but it's not the only option.
A lottery helped in Ohio but it's by no means the only option. Washington Post

In its response to the global pandemic, Australia has so far relied heavily on the stick – think closed borders, lockdowns, unvaccinated travel bans, and 'educational' vaccine marketing videos that are "literally wallpaper" and would probably bore someone to death faster than the coronavirus itself.

But as the crisis shifts towards reopening, we could really use a bit more carrot – or, as some Chinese cities have done, free eggs, vegetables, ice creams, chicken wings and dumplings for those who go and get vaccinated.

What works: There's evidence from the US that, surprise surprise, incentives matter – even small ones, such as a 1-in-a-million chance of winning $1 million:

"The seven-day average number of Ohioans getting their first shots increased the day after DeWine's announcement and continued heading up through Sunday. It’s worth noting that this happened while the number of vaccinations nationally remained flat, suggesting that the trend in Ohio was driven by something different. It’s also worth pointing out that the number of Ohioans completing their vaccinations continued to slip lower, again reinforcing that these were people newly seeking out the vaccine."

Why it works: Economist Alex Tabarrok pointed out that getting vaccinated "is all about immediate costs and future benefits and it's more difficult to act on future benefits than immediate costs, ala hyperbolic discounting. A free beer, donut, or lottery ticket provides an immediate benefit to offset the immediate cost and so may encourage vaccination, especially for those who are very present oriented".

Moving forward: The recent outbreak in Melbourne shows that as many Australians as possible should be getting vaccinated, even if it's with AstraZeneca (you can always get an mRNA booster next year, which may actually trigger a more potent immune response). But people have become complacent and the government's mixed messaging hasn't helped matters.

While Chief Medical Officer Paul Kelly yesterday confirmed all ideas for incentives were "potentially on the table", he tempered that with "the main incentive is because it's going to actually protect you, your family and the community".

Have they learned nothing? If a country such as the US – which was ravaged by COVID-19 – has to offer more incentives than simply the protection of the vaccine itself, then you can be sure that Australia's going to have to lift its incentive game in a big way if we ever want to get close to some kind of herd immunity, re-opening threshold.


The Wrap Up

  • Vitalik Buterin (creator of Ethereum) has a good blog post on how "if you do the math on a napkin, it is easy to convince yourself" that blockchain scaling solutions such as those proposed by Elon Musk are achievable, but "there are many subtle reasons why this approach is fundamentally flawed".
  • Covax – which allocates COVID-19 vaccines proportionally by population to the developing world – has resulted in enormous waste, distributing millions of vaccines to countries unable to administer them. "Freed from freezers, these vaccines could have saved many lives in Peru, India or Brazil, where the pandemic is raging."
  • The top of the table Western Bulldogs were all forced into self-isolation after one of their staffers went to a COVID exposure site in Melbourne.
  • The US State Department and Centers for Disease Control and Prevention (CDC) warned its citizens that: "Because of the current situation in Japan, even fully vaccinated travellers may be at risk for getting and spreading COVID-19 variants and should avoid all travel to Japan." 58 days until the Tokyo Olympics...
  • Due to the coronavirus outbreak in Melbourne, New Zealand paused its travel bubble arrangement with Victoria from 5:59pm AEST last night for at least 72 hours.
  • Nearly half a million Queensland homes and businesses lost power yesterday afternoon "after multiple explosions at a major power station [Callide in central Queensland]".
  • In the wake of the disastrous Upper Hunter by-election, NSW Labor Party leader Jodi McKay announced her intention to stay on as leader, saying: "Am I perhaps not as popular as Gladys Berejiklian? Yes. But for me, popularity is not what is important." Since when did popularity become unimportant for a politician. 🤔

More carrot, less stick was brought to you by Justin Pyvis. Forwarded this issue? Click here to subscribe.