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Macro Australian Economy

Australia Is Doomed — Stuck in Fear of COVID-19 Outbreaks

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By Nick Hubble, Wednesday, 24 February 2021

Each time we get an outbreak, a city locks down and the other states close their borders. My conclusion is that Australia is doomed to be stuck in fear of COVID-19 outbreaks for years. We’ll suffer the economic consequences...

All around the world, further lockdowns are increasingly being ruled out. Politicians are realising their cure is worse than the disease.

But now, more than one year in, it’s finally emerging as some sort of consensus.

Of course, it very much varies with the different dynamics of each country.

And in the biggest countries like the US, the effectiveness of lockdowns has varied wildly from state to state.

But even in countries that have been best at keeping the virus at bay, there are cracks appearing in the strategy. New Zealand’s ‘go-hard, go-fast’ rule is coming under increasing scrutiny, after they locked down its biggest city for three days over what turned out to be a couple of cases that spread nowhere.

‘But going hard and going fast…being overcautious…is the very reason you were able to spend the summer at bars and beaches and music concerts,’ lockdown proponents say.

And there is truth to that.

How to Survive Australia’s Biggest Recession in 90 Years. Download your free report and learn more.

But with every lockdown — especially ones that turn out to be unnecessary with the benefit of hindsight — the strategy loses power.

And support.

Today, I want to ask a simple question.

Will Australia ever be able to stop locking down?

Are we doomed to this strategy — ongoing circuit breakers — indefinitely?

I’m not sure about indefinitely.

But my hunch is that we’re locked into lockdowns…for a very long time to come.

In fact, I believe Australia will be amongst the few nations stuck with COVID-19’s consequences for at least the rest of this decade. For a simple reason: We haven’t fully had the pandemic yet. And that means we’re still at risk of a major outbreak.

The same applies to New Zealand.

In other words, while the rest of the world had and dealt with COVID, we’re still going to be at risk for years to come.

‘But what about the vaccines?’

First of all, we don’t fully know what kind of immunity they provide.

Because they’re still new.

Second, even vaccines don’t prevent the spread of the disease; they mitigate the severity of the symptoms.

As the BBC reports:

‘So far, the available Covid-19 vaccines have not been judged primarily on their ability to prevent transmission — though this is now being evaluated as a secondary endpoint for many of them. Instead, their efficacy was assessed by whether they could prevent symptoms from developing. “This means that we set our targets kind of pragmatically,” says Danny Altmann, professor of immunology at Imperial College London.’

The limited and very early-stage solutions that vaccines offer at this point are not talked about very much.

If you’re stuck in the water at sea, and something floating comes along to cling to, you’ll cling to it. No matter how rickety and full of holes it is.

Then there’s the problem of mutations…

Who knows what new risks they pose?

I don’t.

But we can safely surmise that new ones are coming.

A crop of new ones, called the 677 variants, have just emerged in the US.

A new report by the University of Edinburgh has found yet another coronavirus variant: B.1.125. It’s popped up out of nowhere and is already in the UK, US, Nigeria and 11 other countries.

As Forbes writes:

‘A hallmark of viral variation is that the tiny alterations distinguishing one variant from the next can arise in separate locations at the same time, developing independently of one another.’

The point is we don’t know where this virus is going.

We have no idea.

Then there’s Australia’s hotel quarantine system. It’s an oxymoron.

Each time we get an outbreak, a city locks down and the other states close their borders.

My conclusion is that Australia is doomed to be stuck in fear of COVID-19 outbreaks for years. And we’ll suffer the economic consequences of being at risk of surprise lockdowns as a result…for many years to come.

Each time, it’ll only take a single case to shut internal borders and lock down cities.

Unless, of course, we too rule out such measures and let the virus run free…

That was the strategy in many nations. They didn’t try to keep the virus out. It was about managing the caseload at any particular point in time.

Those nations can now rule out further lockdowns or come close to doing so. Economic life can return to normal with less fear of another outbreak.

For us in Australia, neither option is very optimistic.

But which will we choose?

I think the politicians will choose to try and prevent being blamed for outbreaks. They’ll keep borders sealed with quarantines and have one finger on the lockdown trigger at all times.

You should adjust your life accordingly. And your portfolio.

Until next time,

Nick Hubble Signature

Nickolai Hubble,
Editor, The Daily Reckoning Australia

PS: Australia’s Great COVID Recession — Learn which investments to accumulate and which ones to avoid in order to give you the best chance of preserving your wealth during the recession. Click here to learn more.

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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Nick Hubble

Nick Hubble found us at Fat Tail Investment Research in 2010 after a stint inside Wall Street’s most notorious bank, Goldman Sachs, during the 2008 GFC. That’s where he saw the true nature of the investment banking business. Since then, he’s been the editor of the Daily Reckoning Australia and the UK-based Fortune & Freedom and Gold Stock Fortunes.

He’s delighted to work as Investment Director and Editor for Jim Rickards’ Strategic Intelligence Australia. Here he helps turn Jim’s big-picture views into specific actionable advice and ideas for Australian investors.

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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