Stubbornly dogmatic

Delivered on By Justin Pyvis

Good morning! The Omicron wave on the east coast continues to wane, with cases but more importantly hospitalisations appearing to have peaked last week in both NSW and VIC.

Victoria’s Commander of the COVID-19 Response, Jeroen Weimar, said “we’re in a far better place than we were three weeks ago… we’re not seeing the huge pressure on our relief systems”.

In NSW cases and hospitalisations are well below NSW Health’s best case scenario modelling, with Premier Dominic Perrottet reopening the state’s schools as planned on 1 February.

Great news – someone should let WA Premier Mark McGowan know that his claim that “hospitals are overflowing with patients, hospitals in meltdown. That’s what’s happening”, is actually not what’s happening (see Food for thought below for our full take).


Reading the tea leaves

Daily % change

AUD/USD

72.2

-0.1%

AUD/CNY

4.57

-0.7%

AU Bond

1.88

-4.0%

US Bond

1.75

-4.7%

ASX200

7,176

-2.3%

S&P500

4,398

-1.9%

Brent (bbl)

87.8

-0.1%

Gold (oz)

1,836

+0.2%

Iron ore (t)

137.5

+2.7%

Bitcoin

34,831

-0.6%

Ethereum

2,388

-0.7%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

It was a sea of red on Friday as the US S&P500 plunged another -1.89%, shedding -5.7% cent over the past week as tech was slammed yet again (the Nasdaq fell -2.7% on Friday and -7.6% for the week).

Interestingly, US inflation expectations over the next five years fell to their lowest since March 2021 as signals of an imminent tightening cycle by the Fed are being interpreted as credible, helping to clobber global stock prices that have become addicted to zero interest rates.

Locally, the ASX200 (-2.27%) recorded its biggest weekly loss in 14 months in a broad-based selloff led by the materials (-3.5%) and energy (-3.0%) sectors.


Food for thought

Far from an "unforeseen emergency", the Omicron wave on the eastern seaboard has played out better than expected.
Far from an "unforeseen emergency", the Omicron wave on the eastern seaboard has played out better than expected. Source

According to the latest Commonwealth data (18 Jan, which was roughly peak Omicron), in NSW just 12% of hospital beds and 24% of ICU beds are occupied by COVID-19 patients. In VIC, it’s 8% and 33% – certainly not ideal, but hardly “overflowing with patients”.

So to what, exactly, was WA Premier Mark McGowan referring when he claimed their “hospitals [are] in meltdown”, forcing him to delay WA’s planned border reopening?

It certainly wasn’t the WA Chief Health Officer’s (CHO) advice, which said nothing about the state of the hospital systems over east other than that they were “expected to have their case numbers peak within the next 2 weeks”.

In fact, all the CHO recommended was that “consideration be given” to a postponement of the reopening, with his advice purely on physical “health factors” – in other words, it included no analysis of the economic, social, and other costs of a possible delay.

Based on the Premier’s full statement, it doesn’t look like he considered any of those factors either.

For those interested in the CHO’s advice, the key points were:

  • Booster coverage is expected to hit 75% by 2 March, versus just 35% by 5 February, which would have “a significant impact”. However, by the end of March “the waning of protection from boosters is anticipated to offset this gain”.
  • The government’s supply of RATs only ramps up by late February when 25.75 million will be available, followed by another 37.75 million by the end of March and another 17 million by 10 April.
  • Any decision to delay reopening should be reviewed “within 4 weeks to consider a future opening date”. February, March and April are the best months to have an outbreak in terms of hospital occupancy.
  • An “early and “significant” flu season is expected this year, with “the potential for twin outbreaks if the peak or post peak period is expected to fall in the winter influenza season”.

We find it hard to believe the public health benefits of a delay justified imposing potentially far greater, long-lasting costs on many individuals, businesses and families, which have been plunged back into uncertainty. Especially when you consider that if anything, Omicron has proved to be less damaging than initial modelling suggested (see the chart above from NSW – WA does not release its modelling).

The cynic in us suspects the Premier was most interested in avoiding being embarrassed by his government’s failure to order enough RAT tests in time, given the negative headlines the shortages generated over east. Remember that the WA government decided to ban the private sector from ordering any until two weeks ago and refuses to reveal when it placed its own order.

We’re not alone in questioning the Premier’s motives – the public and media certainly appear to have turned on the country’s most popular Premier. Perhaps the biggest shift was from The West newspaper, which for two years has supported every border decision made by the WA government. That was until last week’s delay, which led to multiple cover pages and editorials slamming the move.

But politicians are nothing if not stubbornly dogmatic – the decision has been made. So when will the Hermit Kingdom actually reopen?

While shifting political winds could blow this forecast out of the water, we interpret the CHO’s advice to mean a reopening is likely to happen before the end of March when most RATs will have arrived, boosters haven’t meaningfully waned and hospital capacity remains favourable, with an announcement due sometime in the next few weeks.

That is, of course, assuming the ongoing Omicron outbreak (24 local cases yesterday) doesn’t make the decision for them.


Bits and bytes

🥝 New Zealand’s Prime Minister Jacinda Ardern plunged the entire country into “red” after a cluster of mystery Omicron cases emerged.

🦠 UK officials are investigating the emergence of Omicron sub-variant BA.2, a mutation that likely “has an increased growth rate compared to its viral predecessor”.

🪂 Estonia, Latvia and Lithuania sent anti-tank equipment to Ukraine, days after the UK sent the country defensive weapons and Canada dispatched “a small contingent of its special forces”, as Russian troops continue to congregate on the border.

⚓ The head of Germany’s navy resigned after saying: “What he (Putin) really wants is respect. And my God, giving someone respect is low cost, even no cost… It is easy to give him the respect he really demands - and probably also deserves.”

🦘 The European Union removed Australia from its so-called ‘white list’, meaning Australians visiting Europe may be subjected to “New testing and self-isolation requirements… regardless of whether you’re considered fully vaccinated or not.”

🤔 Two-thirds of the passengers on the first flight in 10 months to the COVID-free island nation of Kiribati tested positive for the coronavirus on arrival, despite reportedly being double vaccinated, tested negative and in quarantine for two weeks prior to departure.

📈 Inflation in Japan hit 0.5% in December, its fastest pace in almost two years and fourth consecutive monthly rise.

💰 “Several” US Democrats refuse to back President Biden’s “Build Back Better” stimulus plan unless it includes an expansion of the SALT tax deduction, also known as “another giant tax break for millionaires”.

⛏️ Serbia 1:1 Australia, at least according to a Serbian newspaper that took great satisfaction in its government’s decision to block mining giant Rio Tinto’s planned $A3.3 billion lithium mine in the country.

🛂 International travellers coming to Australia are now allowed to produce a negative RAT test within 24 hours of departure instead of the more expensive and invasive PCR test within 72 hours prior to departure.

🏎️ After the Djokovic drama the Australian F1 Grand Prix will not allow medical exemptions for drivers and staff. All drivers are reportedly vaccinated, except for medical car driver van der Merwe.

👨‍🎤 Rock legend Meat Loaf died aged 74, succumbing to COVID-19. It’s not known if he was vaccinated, although he had been vocal against vaccine mandates, masks and said “If I die, I die, but I’m not going to be controlled.”

🍫 The characters that represent M&M’s in adverts will undergo a “woke” makeover to better fit with parent company Mars' “global commitment to creating a world where everyone feels they belong”.

🦅 West Coast Eagle star Jack Darling, believed to be unvaccinated and thus unable to participate in training, claimed he is actually “suffering from a work related injury and as a result I am on sick leave until further notice”.

🥵 Perth set a new record of six consecutive days over 40°C, breaking the previous record of four days which had happened three times in history (2021, 2016, 1933).