How Australia’s ‘post vaccination’ world will look

Scott Morrison will need to learn how to write a new “national leader” rule book. Picture: Getty Images

The rapid spread of the Delta variant of COVID-19 has changed the rules for business, politicians and the community for the rest of 2021.

And it also means that when, as is likely, by the end of the year all those who want to be vaccinated will be immunised then in 2022 we will operate under new rules.

But 2022 will still not be “normal” because it will be a very different environment to 2019.

This new environment comes against a backdrop of increasing wage demands plus areas of the community that will do well against those who are set to suffer badly.

The challenge for CEOs and boards will be to manage this new environment. Some will soar and others will fail, which adds a new degree of uncertainty for share markets.

And, as I will discuss below, the Prime Minister faces a challenge that no Australian leader has faced before.

What happened in the NSW/Victoria outbreak of the Delta variation changed the rules.

NSW gambled that it could delay lockdowns and use its contact tracing system to curb the virus.

Whereas with previous virus variations such a tactic worked, with Delta it did not.

Victoria had learned that lesson earlier and shut down quickly but was too slow in shutting the border and didn’t shut it hard enough.

We then saw how rapidly the variant could spread through both states beginning with relatively few infected people.

West Australian Premier Mark McGowan has the luxury of desert between itself and other states and immediately shut down travel from NSW and Victoria. Sadly these sort of damaging excersises will be with us until “full vaccination”.

We might not like it as a nation, but the power of state premiers is now greater than at any time in the federation.

Prime Minister Scott Morrison has good intentions but so far has not worked out how to play this game and as a result he is suffering in the polls.

Worse still, all too often to ordinary people living outside NSW, he is increasingly looking like the co-premier of NSW. He will need to learn how to write a new national leader rule book.

Until “full vaccination”, lockdowns in geographic areas are one of the few weapons we have to contain the Delta variant.

All enterprises and large areas of the population need to adapt to this situation as best they can in the belief that there will be a much better “post vaccination” era next year.

But adapting is about balancing risks and consequences - there are no certainties.

Accordingly, the blood clotting dangers of AstraZeneca should have been matched against

the dangers of the Delta variant. The risks of severe illness and or death from Covid-19

look to be far greater than the blood clotting risk, but this was not made clear in either the medical statements or those from the Commonwealth government.

Both need to learn from that mistake.

A Covid vaccination is administered at Sydney’s St Vincent's clinic. Picture: Getty Images

Now to 2022. I know many readers will disagree but in my view there is only one criteria to define what is “fully vaccinated” – the ability of every citizen who wants to be vaccinated to be vaccinated.

Whether that results in 60, 70, 80 or 90 per cent of vaccinated people is not relevant.

There needs to be vaccination promotion but the fear of Covid-19 is now much greater in the community and I think there will be a huge take-up of the vaccines and the problem will be supply and delivery.

The community will be very angry if there is another breakdown in this area.

In many ways how we manage the “fully vaccinated” stage is more important in the longer term than the difficulties we are going to face in the next six months.

Our “post vaccination” world will be very different to the world of 2019 and those expecting a quick return to a past era will be disappointed.

In other countries that have reached this stage there is much greater freedom of movement as lockdowns end.

It is recognised that vaccinated people may still get infected but may not get symptoms and those symptoms that do arise will usually be manageable.

People queue at a vaccination hub in Sydney. Picture: Getty Images

So let’s look at what that world might look like.

A cashed-up society will almost certainly still have considerable restrictions on overseas travel so will spend a lot of money on local tourism, events and pleasures. Building will depend on materials.

The secret of successful businesses will be finding a way to entice consumers to spend money in their direction.

I think it likely that a vaccination passport will be required to enter many areas of the community, including airline travel and events.

For the unvaccinated people the risk escalates dramatically because they will be exposed to infections from vaccinated people, while they will be isolated from many areas of the community.

Vaccinations are clearly a risk but in a non-lockdown period non-vaccination will carry an even greater risk.

I think the “fully vaccinated” period will be very prosperous because we are a cashed-up island where people want to spend. We are going to spend large sums on infrastructure and energy reconfiguration.

The big unanswered question is whether it will trigger much higher inflation and interest rates,

with the obvious consequences.

In looking at what might happen I start with the US 10-year bond rate as a guidepost.

Bonds are rising in price and the yields are coming down, partly because bond speculators

believe that the infection rate among the unvaccinated, plus the current shortages of

materials, is holding back business activity and will dampen wage rises.

Certainly, in Australia a month ago we could see wage pressures starting to push up but the lockdowns in NSW and Victoria will severely dampen the wage push.

In Australia next year I fear the wage pressures that we saw building up a month ago will return. Fears of higher interest rates will be a major area of speculation.

The artificial government-imposed restrictions on timber and the promotion of high-carbon emission steel as a replacement may hold back some areas of the building industry in 2022.

And, during 2022, we will start to get our quarantine systems operating properly and overseas tourists and students will start to return. And when that happens the demand for apartments will strengthen.

There is great fear in the community that we are dealing with something we can’t manage.

We can manage it but we have to understand that life will not be the same and we will live with a Covid risk for some time until better vaccines and treatments are developed.