Economics and finance, Government and governance, Law, Health | Australia, Asia, The World

30 March 2020

Quentin Grafton and Tom Kompas use data on COVID-19 to explain what Australia might expect over the next couple of weeks, the costs and benefits of early and severe physical distancing, and why we should not panic but act.

In 1997, a bestselling book written by Jared Diamond was published, purporting to explain how the West ‘won’ world dominance based on the good luck of geography, and because western countries were the first to industrialise. Fast forward to 2020, and to COVID-19. Geography still matters, but the West is no longer ‘winning’. Despite initial mistakes, it seems that China has been successful at containing the virus, and other countries such as South Korea and Singapore have, so far, been able to dramatically slow the rate of infection.

These nations have slowed or stopped the spread of the virus in different ways, but their approaches have all involved some combination of early distancing measures, careful tracking of contagious people and those with whom they may have had recent contact, extensive testing, and identifying people who are asymptomatic, but may be contagious.

Let’s compare this to some Western countries. Those now on the frontline of COVID-19 were slow to respond and are paying a very high cost for this early inaction. As of 30 March, Italy had 98,000 confirmed cases with 10,800 deaths from the virus. While cross-country comparisons on confirmed cases are problematic because of large differences in testing, the United States currently has over 137,000 confirmed cases – the highest in the world, exceeding numbers in China. This number will get much larger very quickly if cases continue to double every few days.

The number of Americans who will die will soon be in the thousands, and possibly tens of thousands, if the United States does not do much more at a national level to ensure physical distancing. If its current growth rate continues, parts of the American health system, especially intensive care units, will be overwhelmed.

Currently, the rate of infection – without sufficient measures – tracks very closely to exponential growth. This allows, with a basic disease spread model, an accurate prediction of the minimum, maximum, and most likely number of confirmed cases, at least for the next week or so. It is worth noting that an increased rate of testing for the virus will increase this number.

The data tells us that for countries in the earlier phase of this pandemic, such as Australia, the number of confirmed cases, which undoubtedly underestimates the rate of infection, is doubling every few days. In Australia, the infection rate began by doubling roughly every four days, and is now doubling every seven days.

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Australia had about 2,000 confirmed cases on 24 March. Given rates of infection and changes in growth, our spread model forecast of infections made on 27 March for the 29 March ranged from 3,950 to 4,460.

The actual reported number on 29 March was 3,984, near the low end of that range. It is important to note that the daily growth rate has fallen from 27 per cent on 12 March to about 9.5 per cent on 29 March. Our forecast for 6pm on 1 April now ranges from 5,080 to 5,970 cases, with 5,220 most likely, and for 2 April the range is 5,510 to 6,835, with 5,715 most likely.

Until physical distancing has had an effect, exponential growth in infections is essentially certain. Current measures in Australia may be decreasing growth rates in infection, but it is too early to tell, and stricter measures will be needed to actually decrease the number of infected.

Overseas data can also be used to estimate a possible overall mortality rate. There is considerable uncertainty about this, but let’s assume it is roughly one per cent, noting that mortality is much higher for vulnerable people. These numbers can be used to compare the predicted number of premature deaths if Australia implements sufficient physical distancing measures to an alternative without them.

This alternative is a worst-case scenario, given that physical distancing has already started in Australia and may already be reducing the growth in infections. Nevertheless, the Australian experiment of not implementing a true national lockdown is most likely a higher risk strategy.

Based on confirmed cases, Australia will have an infection rate on 1 April of about two persons per 10,000. With sufficient physical distancing, Australia could end up with an infection rate of one per cent. By comparison, if it fails to control the infection by not implementing physical distancing, Australia could end up with a much worse infection rate of 20 per cent.

So what is the difference in the number of deaths between an infection rate of one per cent versus 20 per cent? In all, Australia could face an additional 48,000 premature deaths without distancing. This is equivalent to about 30 per cent of annual deaths in Australia.

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Although recent evidence suggests that young people may also be more vulnerable than previously thought, these premature deaths would be clustered in the old and those with co-morbidities, and also in remote Indigenous communities should the virus get there.

Economists use the value of an economic life for cost-benefit analysis of public projects. This measure represents society’s willingness to pay to reduce the risk of an additional death. Using the New South Wales Treasury’s value of a statistical life of $4.2 million, the economic loss of 48,000 premature deaths is some $200 billion or about 10 per cent of Australia’s annual economic output.

This means acting early and hard before the infection rate gets too high, and lowering it as quickly as possible, makes good economic sense.

If the Spanish Influenza pandemic a century ago is anything to go by, going early and hard in terms of physical distancing should also support a faster economic recovery.

The question Australians should ask of their leaders this: Is strict physical distancing a cost worth paying?

The economic benefit from insufficient physical distancing is that, at least initially, more Australians stay employed, there is more economic activity, more taxes are paid, and the expenditures of governments are less.

But not imposing a lockdown or equivalent measures comes at the cost of a higher infection rate, which also means more non-pandemic patients may die because there may be insufficient beds, medical equipment, or staff to look after them. A higher infection rate would also increase the mortality rate of pandemic patients as there may be an inadequate number of ventilators to treat them.

The economy will suffer even without sufficient physical distancing, but the effects would be delayed. Many people will get sick without sufficient physical distancing and many would be unable to work until they are recovered.

A much higher infection rate would also result in the isolation of Australia from the rest of the world. Why would any country – just as Australia did to China – want Australians coming to their country if it had high rates of infection, and why would anyone want to visit Australia?

While the future is uncertain, the outcomes of exponential growth are not. With much more testing and tracking of those with the virus, and with trialling the impact of going from a lockdown to lesser physical distancing in some communities, Australia would have an exit strategy out of a lockdown within a few weeks.

Moreover, anti-viral treatments are being tested and there is hope for a vaccine, likely to be available sometime in 2021. Reducing infection now buys time for these protections to become available.

Implementing a true lockdown, coupled with a government wage subsidy of 80 per cent of a worker’s wage, similar to the United Kingdom’s, but to all casual, part-time and full-time workers who are unable to work because of physical distancing, would go a long way to keep people employed and attached to their employer.

A wage subsidy, coupled with the already announced additional $550 a fortnight COVID-19 supplement to the Jobseeker Payment, would provide most Australians with a basic income to survive and pay the bills during a lockdown.

Such an approach combines ‘sharing the burden’ with ‘flattening the curve’, a two-fold economic and public health approach that would save lives while minimising economic disruption, especially for younger and casual workers who are the most disadvantaged by severe physical distancing. It’s the smarter and safer strategy, and Australia must do it.

Our model for the spread of the infection is an adapted SEIR-M model. It is still under development, needs further validation and also peer-review. For now, we assume a homogeneously mixed population. We are also working on a spatially explicit model to account for more complex population contact. 

Current model results are roughly in line with changes in basic growth rates and their projections by State. We will continue to provide forward projections that can then be compared with actual numbers. All data for COVID-19 is sourced from State and Commonwealth websites. A valuable discussion of this and more complicated infectious disease models is found on the University of Melbourne Pursuit website.

This article was co-published with The Conversation.

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