On 3 August 2021, Treasury released its estimates the direct economic costs of the COVID‑19 management strategies modelled by the Doherty Institute, through analysis of the direct impacts of activity restrictions and lockdowns used to manage the virus and contain outbreaks. And the result is that lockdowns are economically cheaper, too (it seems that State & Territories political ‘lockdown’ instincts were ‘on the money’). I know that this is not tax – but so much Covid relief has been delivered through the tax system, I’ve been reporting Covid relief and related developments.

See below for further detail.

[Tax Month – August 2021]



Executive Summary

The Doherty Institute prepared a report for the 30 July 2021 National Cabinet meeting assessing the impact of different levels of community vaccination on the transmission potential of the Delta variant of COVID-19. It also considered the impact of applying different ‘bundles’ of Public Health and Social Measures (PHSM), including lockdowns.

In this paper, Treasury estimates the direct economic costs of the COVID-19 management strategies modelled by the Doherty Institute. The Doherty Institute’s estimates of the length of time PHSMs are required under different virus management strategies have been combined with estimates of the direct economic costs of the four levels of PHSM, and an assumed frequency and pattern of outbreaks under the Delta variant.

The key findings of this analysis are as follows:

  • Continuing to minimise the number of COVID-19 cases, by taking early and strong action in response to outbreaks of the Delta variant, is consistently more cost effective than allowing higher levels of community transmission, which ultimately requires longer and more costly lockdowns.
  • As vaccination rates rise, significantly less lockdowns and other restrictions will be required to continue to minimise cases of COVID-19, reducing the economic cost of managing the virus.
    • Moderate or strict lockdowns are still expected to be necessary to continue minimising outbreaks until Australia reaches 70 per cent vaccination rates for Australian adults (16+). As a result, the costs of managing COVID-19 will remain high.
      • At 50 per cent vaccination rates, and based on the assumptions outlined in this paper, the direct economic cost of minimising cases is estimated to be around $570m per week. At 60 per cent, the estimated cost remains high, but falls to around $430m per week.
    • Once 70 per cent of Australian adults (16+) are vaccinated, and assuming the spread of COVID-19 is minimised, it is expected that outbreaks can be contained using only low level restrictions, with lockdowns unlikely to be necessary. This will significantly reduce the expected economic cost of COVID-19 management to around $200m per week.
    • At 80 per cent vaccination rates, these direct economic costs are expected to fall further still, to around $140m per week, and costs are lower under all scenarios.

Treasury has not modelled the economic costs of a severe and widespread outbreak that breaches Australia’s health system capacity. It is expected that such a situation would carry very significant economic costs. International experience indicates that it would lead to significant behavioural changes regardless of the level of official restrictions, and longer outbreaks.

Treasury website: Publications Announcement, Analysis Paper]

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