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The coming vaccine slowdown

Good morning! ScoMo and BoJo agreed to an 'in principle' trade deal between Australia and the UK over dinner on Monday night, with the details to be published in the coming days.

However, it's believed to include the elimination of all Australian tariffs on UK goods, an incremental phase out of the UK's tariffs on Australian produce (e.g. beef, lamb and wine) and less restrictive visas for British working holiday makers (no more agricultural work requirement).

It's small in terms of economic impact – we're talking a rounding error (0.02% of GDP by one estimate) – with this deal more about symbolism than substance, as it's "the first to be negotiated from scratch since the UK left the EU in January 2020". The full legal text of up to 1,200 pages is due by early November and could go into force from 1 July next year.

Markets

Daily % change

AUD/USD

76.9

-0.3%

10Y Bond

1.49

2.8%

ASX200

7,380

0.9%

Brent (bbl)

74.3

1.6%

Gold (oz)

1,861

-0.3%

Iron ore (t)

210.0

-0.9%

Bitcoin

40,006

0.7%

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

US markets were all weaker overnight, with the S&P500 falling 0.20% following disappointing retail sales data and rising wholesale prices (see below). Locally the ASX200 gained 0.92% to a new record high after RBA minutes revealed that the central bank "has effectively ruled out ending its unprecedented $200bn bond purchasing program as scheduled in September".

Houses and holes: According to the ABS, residential property prices increased by 5.4% across the country in the March quarter 2021. There were gains in every capital city, led by Sydney at 6.1%, where the average price of a residential dwelling passed $1 million for the first time in any state or territory. The smallest price increase was still a solid 4.0% in Brisbane and Adelaide, with the total value of Australia's residential dwellings rising by $449.9 billion to $8.3 trillion – the biggest increase on record for this series.

Retail slows, prices rise: US retail sales fell 1.3% in May from a month earlier with spending on autos, furniture, electronics, building materials and other items all falling, with the boost from Biden's latest round of stimmy cheques likely exhausted in prior months. However, the US producer price index (PPI – the prices received by producers in the wholesale market) rose 0.8% in May from the prior month, up from the 0.6% increase in April. In the 12 months through May the PPI increased 6.6% (from 6.2% in April), the largest gain since November 2010.


Analysis

The coming vaccine slowdown

More effort is required as we get closer to the 80% vaccination mark.
More effort is required as we get closer to the 80% vaccination mark. OurWorldInData

Since the most recent Melbourne lockdown Australia's 7-day average daily vaccination rate has gone from around 70,000 to over 100,000, which if sustained puts us on track for the 80% vaccinated mark by early February 2022.

The slowdown: Australia's daily vaccination rate adjusted for population is still quite low – hence why our line on the chart above is relatively flat compared to what other countries have been able to achieve. But more worrying is how Australia copes with the inevitable vaccine slowdown. In some countries the rate noticeably slowed once around 45% of the population have had first doses (e.g. the US), while in others it's only just starting to slow (e.g. Canada at just over 60%).

It's not supply: In many of these countries (unlike in Australia) supply is not the limiting factor, which means it's a lack of demand. That poses a challenge for Australia – notwithstanding the odd hotel quarantine failure, Australia has lived COVID-free for most of the pandemic, suggesting we might be more complacent than people in places where the natural incentive to get vaccinated is stronger (health, reopening).

Improvements needed: Nearly a third of Australians have said they're unlikely to get the jab and convincing them will not be easy. The Australian government's vaccination adverts to date have been... lacking, to put it politely, with critics calling them "boring, unemotional and unconvincing". Other countries have done a lot better – France's video is excellent, and both New Zealand and Singapore have opted for videos that are "punchy, funny and barely a minute long".

Another option is to provide people with incentives, with everything from free food, cash, lotto tickets, beer and even a joint being offered in various places around the world. So far Australia has relied on the lure of travel, with ScoMo preparing to unveil a 'vaccine passport' that might allow the fully vaccinated to freely travel interstate or avoid lockdowns (a tricky issue as individual states set the rules, not the Commonwealth). But as we approach our inevitable vaccine slowdown point, the only thing that's certain is more needs to be done to convince people to roll up their sleeves, or we risk being the Hermit Kingdom for several months longer than necessary.


The Wrap Up

  • WA Police accessed supposedly confidential SafeWA check-in data as part of two criminal investigations. Emergency legislation will now be introduced to Parliament to restrict access to the Health Department.
  • Hong Kong's government is considering relaxing international travel quarantine measures for people who have been fully vaccinated for at least 14 days.
  • Queensland released its budget yesterday. The deficit is expected to run $3.5 billion in 2021-22, with a return to surplus forecast for 2024-25 (i.e. after the next election), at which point total debt will have risen to $127 billion.
  • Is 80% the magical number? The US state of Vermont removed the mandate for masks, social distancing and capacity limits for indoor venues after 80% of the state's eligible population (aged >12) received at least one vaccine dose.
  • Not a great look: "Victoria continued to use Uighur labour firm to avoid delays on $2.4b rail project."
  • Novavax said its COVID-19 vaccine is safe, 90% effective and also protected against variants. The company plans to seek authorisation for the shots in the US, Europe and elsewhere by the end of September, producing up to 100 million doses a month. The Australian government has ordered 51 million doses of Novavax's product.
  • Previously unpublished Treasury modelling used in the recent Budget shows that the government's personal income and business tax cuts are expected to underwrite the creation of 120,000 new jobs.
  • About 1,000 pharmacies will be approved to deliver the Moderna vaccine in Australia from October.
  • New analysis from Public Health England shows that two doses of the Pfizer (96%) or AstraZeneca (92%) COVID-19 vaccine is highly effective at preventing hospitalisation from the Delta variant.
  • Microsoft will retire the Windows 10 operating system on 14 October 2025. A new version of Windows is expected to be announced at a Microsoft event on 24 June.

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