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Vaccination Allocation Horizons

Good morning! It appears that the Sydney cluster has become an Australia cluster, with new community cases picked up in the NT, WA and QLD over the weekend. The country's domestic borders are now largely closed (including the bubble with New Zealand) and Sydney and Darwin are both effectively in full lockdowns. Restrictions were brought into QLD, the ACT and WA, with the latter scrapping footy crowds, limiting indoor gatherings and requiring masks indoors and on public transport in the Perth and Peel regions.

All because an airport limousine driver transporting international flight crews was for some reason permitted to work while unvaccinated, with no mask and not subject to regular COVID-19 tests. That and the snail's-pace vaccine rollout, of course.

Speaking of which, if you haven't been vaccinated, go and do it (if you're allowed) – these outbreaks will continue to happen given the inherent leakiness of hotel quarantine and competency levels of those making and enforcing the rules.

Markets

Weekly % change

AUD/USD

75.8

+0.3%

10Y Bond

1.56

0.0%

ASX200

7,308

-0.8%

Brent (bbl)

76.1

+3.5%

Gold (oz)

1,782

+0.8%

Iron ore (t)

212.4

+2.8%

Bitcoin

32,799

-8.4%

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

The US S&P500 (0.33%) hit another record high on Friday, buoyed by US core PCE inflation coming in slightly below market expectations (see below).

Inflation watch: The US core PCE index – the Fed's preferred measure of inflation that strips out food and energy prices – jumped 0.5% in May to its highest level since 1992, bringing the increase over the past 12 months to 3.4%, or almost double the Fed's annual inflation target of 2%. Transitory though, so nothing to worry about, right?

China slowing: Industrial profit growth at large firms in China slowed to 36.4% in May (from a lockdown-affected base last year), down from 57% in April, "as surging raw material prices squeezed margins and weighed on factory activity".


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Analysis

Vaccination Allocation Horizons

The government is expecting a lot of supply to arrive in the coming months.
The government is expecting a lot of supply to arrive in the coming months.

Targets are taboo in Australia given the tendency for them to be set too optimistically and made mathematically impossible several months in advance. So the government's spin doctors came up with a new word (or rather, phrase): the National Vaccination Allocation Horizons.

Stepping back: The last target set by the government was to have 4 million people vaccinated by the end March, which it missed by about 3.3 million, or 83%. Front-line health and aged care workers were to be fully vaccinated by Easter, with the latest estimate now sometime in August. To save face, ScoMo just ... stopped providing any kind of forward-looking vaccination guidance for around 3 months.

Between 14 March and 24 May, Australia even stopped publishing data on the number of first doses it had administered. We weren't alone, though – other bastions of freedom such as Congo, Benin, Turkmenistan, Papua New Guinea, Gambia, Djibouti, Armenia, Nicaragua, Rwanda, Myanmar, Comoros, Algeria and the United Arab Emirates were similarly reluctant to make their first dose vaccination data public.

Why this matters: The government's Vaccination Allocation Horizons provides an estimate of the number of doses the government expects to be able to allocate. It looks like a remarkable ramp-up until you exclude all but 4.2 million AstraZeneca doses (roughly the amount needed to double-dose those who have already had it), at which point it shows that we will only have enough doses to vaccinate 80% of adults by around the start of November.

We've removed the surplus AstraZeneca doses to provide a better indication of supply.
We've removed the surplus AstraZeneca doses to provide a better indication of supply.

However, having doses is only one part of the puzzle. The early doses are the easiest to administer: right now there's no shortage of people who want to get vaccinated. But other countries have found that their vaccination rollouts have become incrementally more difficult over time, with rates slowing considerably once around ~60% of the adult population have had a first dose (just 50% in the US!). We're only just over 20% and yet in Queensland, tens of thousands of people have already no-showed their second Pfizer dose appointment. Not a great start.

That means if the government really is expecting an imminent supply windfall (~1.2 million Pfizer/Moderna doses per week by September), it needs to start selling the vaccine with an incentive programme ... well, now!


The Wrap Up


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