Approaching a COVID-19 endemic equilibrium

As New Zealand continues its fight with the COVID-19 Delta variant, it may seem difficult to imagine a world where talk about vaccination rates is not the primary influence on society. Many countries provide a template to follow as they’re easing mobility restrictions once reasonable vaccination thresholds are reached. Just as the dialogue in New Zealand is gradually changing, businesses and scientists alike are pressing governments on various testing regimes, adopting new treatments, providing booster shots, and most significantly, limiting the circulation of unvaccinated people. In this environment, calculations regarding pressure points in hospitalisations and, especially ICU capacity, have become critical in considering how and when COVID-19 can be treated as endemic.

Once we achieve near our maximum vaccination capability for COVID-19, and immunity to severe infection builds, it seems likely that a scientific and political consensus may arrive at how we live with COVID-19 without ongoing severe business and household disruption.

Already in Europe, the use of vaccine passports, rapid testing, and masks in crowded circumstances have seen a significant rise in mobility between countries. It may seem hard to make the comparison between current trends in Europe and New Zealand given the totally different approaches to the pandemic response. However, at some stage, from a comparative position of strength, New Zealand will need to consider a new equilibrium with COVID-19 treated as an endemic disease where vaccines and treatments become the fresh battle ground.

The spread of Delta slowed the global recovery in Q3 as increased mobility restrictions knocked confidence and added to ongoing bottlenecks that have restricted global trade. Most recent global growth concerns have focused on supply-driven increases in energy costs and the troubles of Evergrande, China’s second largest and most indebted property developer. Recent Chinese economic data have tended to show a further slowing in economic growth.

Similarly in New Zealand, many businesses are feeling more than just a pinch today. Large parts of the Auckland regional economy are not operating fully and, while wage subsidies help retain staff, they don’t replace revenue. As New Zealand emerged from lockdown last year, household savings were high, government support programmes were extensive, the housing market was roaring, and consumption lifted sharply. It seems less likely we’ll see the same enduring surge in demand in the next few months and, to top it off, monetary policy support is expected to be removed over the next year, while historically high inflation is eroding consumer purchasing power.

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