A multibillion-dollar risk is clouding Australia’s economic recovery in 2021: Vaccines.
Emerging concerns that it may take longer than planned to vaccinate the nation against COVID-19 have economists worried about our recovery from recession, both locally and around the world.
Treasurer Josh Frydenberg has talked up a multibillion-dollar windfall from an assumed population-wide inoculation drive in 2021, but the Australian Medical Association has warned that health restrictions may need to stick around longer amid “significant uncertainty”.
“I do have some concern about whether that target of four million [vaccinations] by March will be reached,” AMA president Omar Khorshid told a Senate inquiry on Thursday.
Although Prime Minister Scott Morrison has insisted the rollout is broadly on track, uncertainty about the timeline could leave a gaping dent in the economy, according to Blueprint Institute chief economist Steven Hamilton.
“Every day our vaccine rollout is delayed is another day we have to risk flare ups, further lockdowns and border closures,” Dr Hamilton told The New Daily.
“There’s a tremendous cost to [vaccine] delays. It’s in the billions of dollars. We’re not talking about small numbers here.”
Vaccine strategy amplifies economic risk
Angela Jackson, lead economist at Equity Economics, said a delay in the vaccine rollout would hurt business confidence, particularly where firms are weighing up investment decisions against global uncertainty.
“We’d expect to see less economic activity,” Ms Jackson told The New Daily.
“All of those sectors of the economy that have been hardest hit – tourism and international education – cannot fully recover until the vaccine program is fully rolled out.”
Consumer confidence, which has surged in recent weeks, will also respond more negatively to coronavirus outbreaks in the interim.
Ms Jackson said the government’s failure to secure more vaccine contracts had amplified the risks to the economy.
From both a health perspective but also from an economic perspective there was a very strong case for hedging bets … the fact we’ve only signed contracts for two vaccines is not enough,’’ Ms Jackson said.
As things stand, Australia’s rollout will begin in late February with imported Pfizer doses, though the European Union sparked fears of further delays on Wednesday, warning it might limit exports amid its own health crisis.
It came after Monday’s revelation that 3.8 million AstraZeneca doses due from Europe would not arrive on time, with just 1.2 million now expected by late March.
On Thursday, AstraZeneca Australia market access director Alice Morgan added to the uncertainty when she conceded the vaccine supply situation was fluid and was subject to factors outside the company’s control.
Nevertheless, acting chief health officer Michael Kidd said 10 million Pfizer jabs were still scheduled to be delivered on time, at a rate of 80,000 per week.
“These projections already take into account global supply challenges for both Pfizer and AstraZeneca and the European regulatory proposals,” Professor Kidd told reporters on Thursday.
The Pfizer jab is still the only vaccine approved by the Therapeutic Goods Administration.
But Pfizer Australia market access director Louise Graham was unable to say when the full complement of doses would be delivered.
Australia will now rely more heavily on a local manufacturing deal for CSL to produce 50 million AstraZeneca doses in Melbourne, starting in late March – a touch earlier than expected – at a rate of one million jabs per week.
But that puts Australia in the unenviable position of depending largely on one vaccine, Dr Hamilton warned.
“The government’s foresight in guaranteeing local [vaccine] manufacturing is welcome, but the downside is that we’ve backed a single horse,” he said.
Labor has criticised the government for failing to secure more vaccine contracts, while Dr Murphy told a Senate inquiry on Thursday additional negotiations with other manufacturers were now under way.
Dr Murphy declined to specify the companies with which Australia was negotiating, citing commercial confidence.
But health officials said the government would begin new talks with Moderna in early February.
Deloitte Access Economics partner Chris Richardson said the economic impact of any delay in the vaccine rollout would depend on whether additional coronavirus clusters emerge in 2021.
“If we’re travelling along with relatively low COVID numbers anyway [a delay] may not make a difference,” Mr Richardson told The New Daily.
“But if it’s substantially later, and hopefully not, we may get more of what we’ve had in recent months: Little outbreaks that need to be chased down instead of vaccines doing the heavy lifting.”
This could slow down the jobs market recovery and put a dampener on wage growth and overall production levels, particularly if border restrictions or lockdowns need to be reimposed.
A small outbreak in New Zealand has already driven a reintroduction of quarantine restrictions for Kiwi tourists this week.
Mr Richardson has forecast a 4.4 per cent rise in economic output in 2021, as Australia bounces back from the pandemic.
But he said the outlook hinged on the vaccine rollout proceeding as scheduled.
Under forecasts published in December, Treasury assumed a population-wide vaccination drive would be completed by October and potentially deliver a multibillion-dollar boost to the economy.
Professor Kidd on Thursday confirmed officials remained confident that vaccinations would be completed by the end of October.
Mr Richardson said vaccine supply delays also posed a risk to Australia’s recovery from a global perspective, underscoring how a slower international rebound could affect export industries and the flagging tourism sector.
“The global rollout challenges are at least as important for the Australian outlook [as our rollout],” Mr Richardson said.
“Globally, a longer vaccine rollout means a longer period of a global economy under considerable challenge.”
Mr Frydenberg’s office did not respond to a request for comment before deadline.