Australia's upcoming storm

Welcome to Plugging the Gap (my email newsletter about Covid-19 and its economics). In case you don’t know me, I’m an economist and professor at the University of Toronto. I have written lots of books including, most recently, on Covid-19. You can follow me on Twitter (@joshgans) or subscribe to this email newsletter here. (I am also part of the CDL Rapid Screening Consortium. The views expressed here are my own and should not be taken as representing organisations I work for.)


In 1957, On the Beach described the period after which a nuclear war left Australia directly untouched but a radioactive cloud was slowly approaching. Right now, that feels like the situation Australia (and New Zealand for that matter) are facing with respect to Covid-19. A storm is coming and Australia does not know how to deal with it.

I already discussed this issue but there are some additional updates I’d like to revisit. My main motivation is that Australia has not changed its strategy. It continues to pursue a policy of creating a fortress while hoping for Covid-19 to “magically” disappear elsewhere. But that is not going to happen. Covid-19 will become endemic and will always be circulating. Australia would need to be vaccinated at a rate of greater than 90 percent to keep itself free from outbreaks given the new variants going around. This is no longer a practical policy. When that becomes realised, the end result is going to be extremely painful. It will be made more so because it is profoundly unfair as the pain would have been avoided had the rest of the world been more like Australia.

What happened before

Not to get all Battlestar Galactica on you but “all this has happened before and will happen again.” Back in 1918, Australia pursued exactly the same policy with respect to the influenza pandemic spreading throughout the world. It shut its borders. Tight.

Early in 1919, according to John Barry in The Great Influenza, only Australia had escaped the virus.

Some ships arrived there with attack rates as high as 43 percent and fatality rates among all passengers as high as 7 percent. But the quarantine kept the virus out, kept the continent safe, until late December 1918 when, with influenza having receded around the world, a troopship carrying ninety ill soldiers arrived. Although they too were quarantined, the disease penetrated—apparently through medical personnel treating troops.

The virus that did get in was far less lethal than the one that had ravaged the rest of the world. Fatality rates were about a third of the US and a quarter of Italy.

But what interested me was the scar it left. The pandemic ended up infecting 2 million (40% of the population) and killing 15,000 and was referred to and remember by all and sundry as “The Plague” or “Black Death.” It wasn’t that but the stories made it feel like that. There was widespread mask-wearing and quarantining. Here are the stats:

Unlike Covid, this mainly hit younger people perhaps because the older population acquired immunity in 1891. From one history ….

Australia, like most countries, was ill prepared to cope with such a disaster. The war had severely disrupted social and economic life, removed many medical personnel and disrupted public services. In an attempt to contain the outbreak, Australian authorities instigated a combination of strategies. Schools, theatres, dance halls, churches, pubs and other places of public congregation were shut, streets were sprayed, special isolation depots were established and people were compelled to wear masks in public. Movement by public transport was restricted and state borders were closed, with quarantine camps established at border crossings. Attempts were made to produce a vaccine using a mixture of victims’ sputum, streptococcus and staphylococcus concoctions. Hundreds of thousands of people demanded inoculation and the government established more than 1260 public inoculation depots throughout Sydney, as well as relying on private practitioners. In a little over six months, more than 819,000 inoculations were performed, including more than 440,000 in Sydney, which was more than 50 per cent of the city’s population. People were urged to practice personal preventive measures such as cough etiquette, hand washing, ventilation and disinfection.

And it also led to something already quite familiar.

The pandemic caused disputes between all the states and between the states and the Commonwealth over border closures, differing policies of border controls and quarantine, interstate transport links, and the quarantine of returning servicemen. Eventually, cooperation between the states and the Commonwealth authorities was abandoned, with each state imposing its own conditions and organising its own containment policies.

The point of this historical example is that even in 1919 it was impossible to keep a respiratory virus out of Australia. Even as the pandemic waned elsewhere Australia remained vulnerable.

Keeping the fortress

The status quo in Australia is a very strict quarantine, isolation from the rest of the world and periodic lockdowns as small outbreaks are contained. Alongside that, there is a vaccination program but it is not going well.

Sadly, this with only 15% of the population with a first dose and a slowing growth rate, this is already hitting vaccine hesitancy limits. There is no chance that a protective share of the population will be vaccinated by the end of the year and there is a good chance that will never be the case.

This means that Australia, if it wants to keep Covid out entirely, will have to remain as closed as it is now.

Opening a little

Could opening a little do the job. Steve Hamilton and Richard Holden crunched the numbers on whether Australia could open up to visitors who are both vaccinated and tested negative for Covid. They found that Australia would expect to have 1.2 people with Covid get through each day. Here is their calculation:

The likelihood of a negative-tested and vaccinated migrant to Australia being COVID-positive depends on three numbers: 1) vaccine efficacy; 2) the false-negative test rate; and 3) the infection rate. Vaccines like Pfizer have around 95 per cent efficacy. This means that, relative to a control group that did not receive the vaccine, symptomatic infection was reduced by 95 per cent. Standard COVID-19 tests have a false-negative rate of 9.3 per cent. This means that around 1 in 10 people who are actually COVID-positive would nevertheless test negative. The current infection rate in the US, based on the positive test rate over a 14-day incubation window and an estimate of test underreporting (given not all COVID-positive people will get tested), is around 1%. In some countries, this rate is even higher. When you multiply these percentages: 5 per cent x 9.3 per cent x 1 per cent, you get a seemingly tiny number: 0.0046500 per cent. But prepandemic, we received around 9 million international visitors per year. If we were to go back to that level of openness right away, then we would expect around 419 people per year to come to Australia with COVID-19. That’s around 1.2 imported infections per day. And don’t forget: the pandemic started with just a single case, growing exponentially from there.

Both vaccines and tests are imperfect. That makes them almost but not quite 100% effective when used together. That adds up even if you were to go a quarter of the way towards normal travel.

The point here is that you are either a complete fortress — for years — or you aren’t. The cost to doing so as Hamilton and Holden point out is considerable:

In the first year of the pandemic, we lost about $10 billion from the sector. But because many students are on multi-year visas, this was only the tip of the iceberg. In 2020, student visas granted to those outside Australia fell by 150,000, or 63 per cent. If we remain closed through the end of 2021, as seems likely, our economy is set to lose another $20 billion or so from higher education alone.

What’s the alternative?

The alternative is obvious: you have to give up on Covid-Zero. That is what South Korea and Taiwan have done. And that runs risks. Taiwan, for instance, has an outbreak going on right now. But the idea is that you work hard to contain those outbreaks through post-entry means like comprehensive testing and tracing while having a good share of your population vaccinated.

But the road from a fortress to a realistic alternative is painful. The point is to live with the virus rather than keep it at bay. The virus does get in. That will have a role in boosting vaccination rates but at the same time, there will be harm and disruption. However, this does not imply letting it rip like in 1919. Instead, it requires taking your cues from countries that did and are living with the virus and matching best practice.

It’s Time … for a Real Plan

The Australian government are basically praying for some sort of miracle. But any plain reading of the facts suggests that it is highly unlikely. To be sure, they could just wait and see even if there is a small chance it all works out. But some level of competence suggests there needs to be a plan and that plan would start with explaining to the Australian people that they are on the beach waiting for disaster to arrive. They need to prepare themselves for it.