Sep 29 2020
Australia and the rest of the world have been on a steep learning curve with the COVID-19 pandemic. Statistics have been used to a greater and more frequent extent—indeed, reaching 24/7 saturation—than in any pandemic or epidemic in living memory. However, gaining perspective and making the best decisions has been, and remains, controversial.
These challenges are in the hands of health professionals, politicians, business people, economists (largely ignored), the population and the media. None of these groups were ready with models, diagnoses or solutions, and they were even less ready in countries such as Italy, the UK, the USA and many others.
The stakes are high due to the following factors:
- The level of fear of death, and the preparedness to sacrifice freedoms in society.
- The decline in economic output and in the standard of living due to governments’ response to the above.
- Rising business closures (normally 13% of the nation’s total each year, anyway).
- Bankruptcies and insolvencies (normally around 1-2% of total businesses p.a.).
- The urgency of developing a vaccine.
- The need for a thorough post-mortem on the crisis, so we can better manage future pandemics.
The main difficulty is the elapsed-time analysis. How best to handle this pandemic—and future pandemics that we are sure to face—with minimal loss of life and manageable deficit spending?
We know how many have died, and are dying, from COVID-19. These deaths are estimated to account for less than 3% of all deaths in the world in 2020, or 0.02% of the population. Hardly significant percentages, yet the fear of being one of these statistics has dominated public opinion, and has led to the support of many constraints on living and working put forward by politicians worldwide.
Australia’s COVID-19 statistics are even less significant than those of many other nations. Deaths due to COVID-19 are estimated to account for 0.7% of Australian deaths in 2020, or 0.005% of the population. Yet governments at federal and state levels have indicated a deficit of $360.0 billion, due to the cost of managing the pandemic. Indeed, if we had pandemics like this one and spent that sort of money every 5-7 years, we would experience a long decline in our standard of living (SOL). As it is, many forecasters see the possibility of our SOL taking until 2025 to get back to the level recorded in the year to March 2020. Hopefully, this recovery will happen sooner.
So, how bad is the current pandemic compared with others over the past century or so? The next chart provides some perspective. While COVID-19 is nasty, the deaths related to this pandemic have not matched the deaths, or death rates, of the really nasty ones. The worst one, the Spanish Flu (which likely entered the country with returning WWI soldiers), led to only 12,000 deaths, or 0.2% of the Australian population at the time. We seem to fare far better than other countries, and the world average, in terms of deaths as a percentage of all deaths, and as a percentage of our population.
At the current rate, by the end of 2020, we will likely have averaged 4-5 deaths per day from COVID-19 over the 9 months from March, albeit with two spikes (the second concentrated in Victoria). And the vast majority of deaths will have occurred among those aged over 70. In addition, most of these individuals will likely have had other pre-existing health issues. Concurrently, the average total daily deaths from all causes will have been around 460 people per day. This perspective has not been used to assuage the fears, if not terror, in the population. Nor has the reality of post-COVID-19 deaths and damages.
Which leads to the elapsed-time analysis, which cannot be assessed yet with any accuracy as we near the end of this extraordinary year. Such analysis must assess the following:
- COVID-19 deaths (and perhaps case-testing and infection-rate numbers).
- Potential aftermath deaths due to deferred testing of cancer and other deadly diseases.
- Potential aftermath deaths due to above-average suicide rates.
- Potential aftermath deaths among impoverished retirees unable to access elective surgeries.
- Economic destruction, including business closures.
- The costs incurred by governments.
- The efficacy of stimulus spending and assistance programs (cost-benefit analysis).
- The media’s role in covering the pandemic.
In short, we need to find the best ways to handle future pandemics. However, we may not have enough data, statistics and objectivity to do this dispassionately and properly until 2022, or even later.
From a business point of view, it is sobering to know that governments in Australia shut down tourism (an estimated 2.8% of GDP), restaurants (1%), international air travel (1.3%), entertainment (> 1%) and other direct or collaterally damaged industries (at least 8%); or around 15% of the economy. We will have lost 5-7% of GDP over a few years, incurring a deep recession and possibly leading to a depression (two years of successive negative growth). But again, hopefully not the latter.
IBISWorld in Australia, and worldwide, has provided vital help to its clients regarding the general and industry-specific impacts of the COVID-19 pandemic, and the changed forward outlook over the next 5 years. We appreciate the feedback and thanks that have followed.
To finish on some of the positives that can come from a crisis such as we experienced this year, we list a few of the ongoing changes:
- Growth in the practice of partial (rather than full-time) working from home.
- The criticality of WBP communications in a virtual working world.
- The need to spread economic risk with imports and exports for safety.
- Better preparation, testing and medical treatment for pandemics.
- A better coalition of knowledge and skills for future pandemics by balancing health, politics, business, economics and media in decision-making.
As always, we will go on to have a better future with growing knowledge, greater wisdom and a higher standard of living. It may just take several, if not a handful, of years to get there.