To lift or not to lift, that is the question (with apologies to Hamlet).     When and how will be exercising minds in the Beehive.   While the trend rate for new cases provides some cause for optimism there are two factors that I suspect will be causing concern.  

Singapore has been held as a model for managing the virus yet in the past couple of days there has been a spike in new cases … does that translate into the second wave so called?    Then from South Korea the news that some recovered patients are still testing positive for Covid-19 … does that mean they remain the modern day equivalent of ‘Typhoid Mary’ and able to infect others whilst appearing normal?

For those two reasons (there may be others) I expect the government to be cautious in moving from Alert level 4 to 3 and lower.    There may well be a redefining of those levels; we may well see differing Alert levels for differing parts of the country requiring travel restrictions to be put in place … but how to manage that would be a challenge.

Whatever, but as I said, I expect the precautionary approach will weigh heavily on the government in its thinking.    What the government would not want to see happen is having to reimpose Level 4 restrictions on an area or areas.    That would be a killer (no pun intended).

But equally the government will be very conscious of the economic scenarios released today by the Treasury.   In simple terms and based on government intervention being contained within the already announced $20b fiscal envelope they see GDP declining from around 13% in scenario #1 (Level 4 one month, followed by level 3 one month … best case) to 33% in scenario #3 (Level 4 three months, followed by Level 3, three months … worst case) with unemployment peaking at 17% in scenario #1 and 26% in scenario #3.

The Treasury also modeled the effect of a further intervention by the government of $20b (total $40b) and $40b (total $60b) on those scenarios.    That would see the decline in GDP arrested and unemployment dropping by about 6% on the numbers in the preceding paragraph.    I expect the government to intervene further but there is a limit to how far government can go with what is in effect quantitative easing before inflation starts taking off.

Going to be an interesting few months.