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The Freedom Zone

Good morning! On Friday evening ScoMo announced the results of the no doubt very expensive (and unpublished) Doherty Institute modelling on vaccination thresholds, which will form part of Australia's four phases to freedom. We cover it in more detail below but regular Wrappers will not be surprised, as the modelling produced the exact number – 80% of eligible adults – we've been using repeatedly for two months.

The other major pandemic news over the weekend was from Queensland, where eleven LGAs in the south-east were locked down on Saturday afternoon and will remain that way until 4pm tomorrow, with the government's aim to "go hard and go early". The cluster is of the Delta variant and has so far been centred around four Brisbane schools, with the origins gnomically traced to two people who returned from overseas and were in hotel quarantine.

Yep, another hotel quarantine breach...

Markets

Weekly % change

 

AUD/USD

74.0

+0.3%

 

 

10Y Bond

1.19

-0.8%

 

 

ASX200

7,393

-0.0%

 

 

Brent (bbl)

76.4

+3.1%

 

 

Gold (oz)

1,813

+0.6%

 

 

Iron ore (t)

182.0

-7.8%

 

 

Bitcoin

41,189

+22.7%

 

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

The US S&P500 fell 0.54% on Friday after a disappointing earnings report from Amazon (-7.6%), with revenue coming in below estimates and a pessimistic forward outlook. Locally the ASX finished down 0.33%, slipping in the afternoon trade as US futures tumbled, but it still managed to notch up its tenth consecutive monthly gain and 15th in the past 16 months.

European rebound: Growth in the 19-nation European Union increased by 2% in the June quarter, beating estimates with Italy, Spain and France all doing well, while Germany came in a bit weaker (1.5%) than expectations (2%). Euro area inflation climbed to to 2.2%, higher than the new goal set by the central bank but, of course, policy makers expect it to be "transitory".

Inflation watch: The US personal consumption expenditures (PCE) price index – the Fed's preferred measure of inflation because it strips out goods no one needs like food and energy (!) – rose 0.5% in June and 3.5% in the 12 months to June, the most since December 1991. It'll be interesting to see how "transitory" inflation is when the Owners' Equivalent Rent (OER) component, which lags movements in home prices due to fixed lease terms and the moratorium on evictions (see The Wrap Up below), starts to reflect reality.

China slowing: The sheen is coming off China's recovery as its credit impulse reverses. The official manufacturing Purchasing Managers' Index (PMI) in July showed factory activity expanded at its slowest pace for 17 months, with the iron ore price plunging 5.9% on Friday.


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Feature

The Freedom Zone

Gif showing a clip from the movie Braveheart.
Australia is getting closer to its very own Freedom Day. Braveheart/Giphy

ScoMo released the Doherty Institute modelling that will dictate when Australia will be permitted to reopen. The two most important figures are 70% and 80%.

By the numbers: National cabinet has accepted the modelling, with the first threshold triggered when the fully vaccinated eligible population – those aged over 16 – in a specific state and the national average reaches 70%. Once that happens, a state can move to 'Phase B':

"Lockdowns in phase B are less likely, but they are possible ... in targeted cases and more targeted cases, they may be necessary in those circumstances, but they are not something that you would normally expect because of the much higher level of vaccination and protection that exists within the country."

In Phase B, international arrivals will still be restricted but there will be yet-to-be-specified "special rules" for vaccinated people domestically, allowing them to avoid certain restrictions.

The next and currently final threshold (no 'Phase D' details were offered) will be triggered when 80% of the eligible population is fully vaccinated, which would allow states to move onto 'Phase C':

"There will be a gradual reopening of inward and outbound international travel with safe countries, those that have the same sort of vaccination levels that Australia."

In this phase, the prohibitions on Australians leaving the country will be removed, fully vaccinated people will be allowed to return without quarantine and certain visa categories (e.g. students) will see arrival caps expanded. "Broad metropolitan lockdowns” will also be a thing of the past, although localised lockdowns will still be a possibility.

Chart showing one possible vaccination scenario.
One possible vaccination scenario, based on federal government supply projections and our own assumptions.

Why this matters: Freeeeedooommm! But in all seriousness, this is the closest thing the government has provided to a vaccination rollout target since the early, optimistic days when the AstraZeneca vaccine was still held in good regard.

The chart we've provided above offers a ballpark estimate of how long it might take to reach what we've dubbed The Freedom Zone, which was derived using the government's estimates of supply and a few simple assumptions. Unless the take-up of the AstraZeneca vaccine surprises on the upside, we're looking at mid-November for the 70% threshold and the start of December for 80% as a best-case scenario.

Of course, if there's any significant latent vaccine hesitancy in the community or scheduled deliveries of Pfizer are delayed then the timeline could be pushed back further.


Tokyo 2020 🗼

Australia added 6 more gold medals to the tally since our Friday update, taking out the women's 50m freestyle, women's 100m freestyle, women's 200m backstroke, women's 4x100m medley relay, men's BMX freestyle and men's laser sailing.

The star was Emma McKeon, who secured her third gold medal in this Olympics while also becoming the first women since 1952 to win seven medals at one Olympic games AND Australia's most successful Olympian of all time, with 11 medals.

Australia's swim team became the most successful Olympic swim team in history, after amassing a total of 20 medals (9 gold) in Tokyo. Sunday was the best single day Australia has ever had in the history of the Olympics.

Medal tally

🥇

🥈

🥉

1 🇨🇳 China

24

14

13

2 🇺🇸 United States

20

23

16

3 🇯🇵 Japan

17

5

9

4 🇦🇺 Australia

14

3

14

5 🇷🇺 ROC

12

19

13


The Wrap Up

  • 💉 A new study published in medRxiv (not yet peer reviewed) found that in vaccine-breakthrough Delta variant infections, viral loads in vaccinated individuals still fell faster than in the unvaccinated and the odds of severe infection (i.e. hospitalisation) are "significantly lower after vaccination".
  • ⛈️ Perth recorded its wettest July in 26 years (271.4mm), falling just 7.2mm short of the 1995 record. It rained on 28 of the 31 days, which hadn't happened for 75 years.
  • 🏛️ Distort the market at your peril – the US federal eviction moratorium expired on Saturday at a time when rental prices are rising at an annualised rate of 19.2%, with the possibility of "a years' worth of evictions over several weeks".
  • 👷 1 out of every 153 American workers is an Amazon employee.
  • 👏 Well done Victoria, now make it 8 weeks – "The interval between Pfizer vaccine doses given to Victorians at state-run clinics will be extended to six weeks in a bid to get more jabs in arms during supply constraints."
  • 🔥 Victoria's "big battery" caught fire on the weekend, with 150 firefighters called in to battle the blaze just two days after it had been registered with the energy market operator.
  • 🚀 A "software glitch" caused the new Russian Nauka module to "suddenly and unexpectedly fired up its thrusters" while docked to the International Space Station, sending it careening off course.
  • 🔌 Nikola Corp, which claimed to have developed working prototypes of an electric truck, in fact cobbled them together using parts from other vehicles, powered them with plugs leading from hidden wall sockets and towed them to the top of a hill before rolling them down to the bottom to demonstrate movement.

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