Coronavirus vaccine a ‘game-changer’ for Australia, says Deloitte

Widespread vaccination will improve Australia’s prospects in 2021, limiting the frequency of COVID-19 outbreaks and eventually allowing the nation to open its borders to the world.

Chris Richardson from Deloitte Access Economics says the COVID-19 vaccine will ease pressure on the Australian and global economies in 2021. Picture: Richard Jupe

The vaccine will be a “game-changer” for Australia’s prospects in 2021, first by limiting the frequency of COVID-19 outbreaks and restrictions and then by allowing the nation to open its borders to the rest of the world.

Deloitte Access Economics partner Chris Richardson said with virus numbers low and the “jobs story here already very good”, the nation starts the new year in a “better position than just about anywhere else”.

Based on a central scenario of widespread vaccination by the end of this year, which would allow inter­national travel to restart, Mr Richardson said the economy would grow by 1.2 per cent in 2020-21.

That was significant upgrade from Deloitte’s previous outlook in October that predicted real GDP this financial year would shrink by 2.5 per cent.

Deloitte’s latest forecast has national output expanding by 3.3 per cent in 2021-22.

In comparison, Treasury in its December mid-year budget update predicted the economy would grow by 0.75 per cent in 2020-21, and by 3.5 per cent in 2021-22.

The faster than anticipated rebound in Victoria following its reopening and a more robust than expected labour market recovery growth has triggered heightened optimism around the pace of the path back from the biggest contraction since the 1930s.

Doctors have cast doubt on the efficacy of the AstraZeneca vaccine in preventing contracting the coronavirus, and therefore on its capacity to provide the desired herd immunity, but Mr Richardson said the “real risk is that the virus mutates faster than we can vaccinate”.

“If the virus mutated faster than we can get new vaccines in millions of arms, then we would have some forever version of social distancing and hotel quarantine.”

He said this scenario would not flatten the economy but “the economy would underperform its earlier potential when we could move more freely, and the economy will always be smaller than it otherwise would be”.

He said he saw the delivery of a vaccine, starting from late February, as a “game-changer”.

If government plans come to fruition, vulnerable Australians and frontline workers will have received a shot by the end of March, about four million people.

Mr Richardson said while that number of vaccinations might still be “well shy” of herd immunity, protecting those most exposed to the virus — such as hotel quarantine workers and medical staff — would stop a key avenue of COVID reaching the community.

“Broadly, we may only be a handful of months away from a phase in which outbreaks in Australia are rare, lockdowns are rare, and state border closures are rarer.

“We won’t be out of the woods, but in terms of the recent troubles (such as Sydney’s cluster), you can start to plug those holes well before you reach herd immunity.”

The gathering pace of the recovery has put the country on track to regain its pre-pandemic size by February, according to the Deloitte forecasts. Mr Richardson said it was even possible that December national accounts – due early March – could show GDP finished 2020 at the same level it was a year ago.

While the nation’s prospects look bright, they do so in the context of a once-in-a-century pandemic, Mr Richardson said, with many more Australians without jobs or working fewer hours than they’d like.