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Analysis: Vaccinations and the path out of the pandemic

• The Sydney lockdown is in its fifth week and looks set to be extended well beyond July 30. Snap lockdowns have also been in place in Victoria and South Australia. Given the high transmission rates of the delta variant, snap lockdowns are likely to remain a ‘tool of first resort’ in controlling the virus until vaccination rates lift.
• In our recent Vaccine Weekly we have noted that the government’s vaccine supply schedule suggests 80% adult vaccination could be reached as soon as mid-November if uptake is high and there are few rollout bottlenecks. In this Weekly, we turn to the experience in countries with more progressed rollout programs to get a sense of what conditions could look like in Australia as the vaccine rollout matures.
• The key theme emerging from Israel, the UK and the US is that vaccine efficacy remains very high. The high transmissibility of Delta means a very high vaccination rate may be required to avoid high levels of transmission and hospitalisations for those who are unvaccinated and/or have supressed immune systems. Booster shots are also being discussed for those immune suppressed in the US and this is already being carried out in Israel.
• Early indications from the UK’s Freedom Day experiment, where most social distancing restrictions were repealed, shows that the link between new cases and hospitalisations has been severely weakened. Encouragingly new cases while high, have been trending lower over the past five days. Overall, the UK suggests we should be able to get to the stage where we are able to start to live with the virus.
• As for what vaccination thresholds Australia needs to start to transition living with the virus instead of aggressively supressing it remains unclear with the government waiting on modelling to calibrate thresholds. NSW Premier Berejiklian has cited 80% adult vaccination. As some guide, the US has now fully vaccinated 60% of its adult population, the UK is at 70.3% and Israel is at over 80%. NAB’s calculation is that it is plausible we could get to 80% adult vaccination by mid-November with a strong vaccine uptake.
• For markets, they should continue to be able to price the other side of the pandemic given the UK, Israel and the US are making the transition to living with the virus. Risks, especially around vaccine uptake, remain, and easing of restrictions in many advanced economies may need to be pushed out by a quarter to buy time for vaccination rates to lift sufficiently. In some countries limited restrictions including mask mandates are being re-introduced, while vaccine passports are being used in Europe to encourage higher vaccine uptake.

Chart 1: UK breaks link between cases and hospitalisations

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