Australia: Budget 2021


Frydenberg spends the budget bounty to drive unemployment down to new lows


Peter Martin, Crawford School of Public Policy, Australian National UniversityNever before has a budget spent so much to supercharge the economy after the worst of a recession has already passed.

The economy bounced back from last year’s COVID recession far more sharply than the treasury (or just about anyone else) expected.

The bounty from the higher-than-expected tax collections that flowed from more people than expected in work, a much higher-than-expected iron ore price, and lower than expected unemployment benefits, should amount to A$26.8 billion this financial year, $15.5 billion the next, and $18.6 billion the year after that.

But rather than bank those riches and improve the budget bottom line, as the Coalition’s budget strategy used to require it to do, the government has instead decided to spend the lot.



It will spend $21 billion of this year’s $26.8 billion; it will spend or give up in new tax concessions $26.9 billion — far more than next year’s $15.5 billion bounty, and so on.

Treasurer Josh Frydenberg has come good on his historic promise to keep spending way beyond the crisis, to drive the unemployment rate down below where it was when the pandemic started.




Read more:
View from The Hill: Frydenberg finds the money tree


The budget predicts an unemployment rate of 4.75% by mid-2023 and 4.5% by mid-2024.

If delivered (and the treasurer’s revised strategy published in the budget requires him to keep spending until it is), it will mark what the budget papers describe as, “the first sustained period of unemployment below 5% since before the global financial crisis, and only the second time since the early 1970s”.



In the same way as Australia emerged from the early-1990s recession with a dramatically lower inflation rate because the Reserve Bank was determined to salvage something from the carnage, Frydenberg has decided to exit the COVID recession with an ongoing lower floor under unemployment.




Read more:
Less hard hats, more soft hearts: budget pivots to women and care


Both the treasury and Reserve Bank believe Australia can sustain much lower unemployment than the 5-6% it has grown used to. The treasury’s estimate is 4.5%; the Reserve Bank’s is nearer 4%. Before COVID, the United States managed 3.5%.

If achieved, it will mean hundreds of thousands more Australians providing services, drawing paycheques, and paying tax. And no longer on benefits.



A dramatic budget graph tracking the fortunes of every Australian whose payroll was reported to the tax office throughout 2020 shows the biggest victims of the COVID recession — by far — were those without post-school education. At the deepest point of the COVID recession in May, they were almost three times as likely to have lost their jobs as Australians with degrees.

The budget provides an extra $400 million for low-fee or no-cost training for jobseekers, to be matched by the states; an extra $481 million for the transition to work employment service directed at Australians aged 24 and under; and a further $2.4 billion to the Boosting Apprenticeship Commencements program.




Read more:
Budget 2021: the floppy-V-shaped recovery


But most of what it intends to do for jobs is the indirect result of a barely precedented expansion in spending and tax concessions in all sorts of areas.

The extra $17.7 billion it is spending on aged care over four years ought to create many jobs, as should the extra $13.2 billion it is spending on the National Disability Insurance Scheme.

The $1.7 billion it is spending on making childcare more affordable should both create jobs in the sector and free up more parents to return to work.

An extra $20 billion in business tax concessions should help as well.




Read more:
Cuts, spending, debt: what you need to know about the budget at a glance


The budget’s break with the past isn’t its dramatic expansion of discretionary spending. That’s common in recessions. What’s unusual is that spending is being ramped up when we are not in recession.

In the words beloved of economists, the spending is “pro-cyclical” rather than “counter-cyclical”. It is designed to supercharge our exit from recession rather than merely bring it about.

And there’s little sign of the spending stopping.

If this government or the next achieves success in driving the unemployment rate down to 4.5%, it will want to go further. It will keep going further right up until we get inflation near the top of the Reserve Bank’s 2-3% target band and wage growth in excess of 3%, neither of which this budget foresees in forecasts going out four years.




Read more:
Budget splashes cash, with $17.7 billion for aged care and a pitch to women


Government debt, anathema to the Coalition when Labor ran it up during and after the global financial crisis, isn’t much of a constraint.

The Reserve Bank holds much of the government’s debt (it didn’t during Labor’s time) and is buying as much as it needs to to keep interest rates low. Recently, interest rates have been rising, but not for most of the government’s borrowings, which are long-term.

The budget papers show that even with net government debt at 34% of GDP and heading to 44%, interest payments on that debt are much less of a drain on the budget than they were back in the mid 1990s when net debt hit 18% of GDP.



And the times have changed. Worldwide, few nations have an aversion to government debt, especially not the United States. In Australia, the only side of politics that used to complain about debt is in currently in office.

Before COVID, the fiscal strategy spelled out in the budget as part of the Charter of Budget Honesty required the government to eliminate net debt.

Frydenberg’s revised strategy merely requires him to stabilise and then reduce net debt “as a share of the economy”.

His priority is driving down unemployment. If that helps expand the economy and so drives down net debt as a share of the economy so much the better. But he wants to do it regardless.

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Budget splashes cash, with $17.7 billion for aged care and a pitch to women


AAP/Mick Tsikas

Michelle Grattan, University of CanberraThe Morrison government has brought down a big-spending, expansionary budget that forecasts Australia’s unemployment rate will fall to 4.75% in two years time.

But Australia’s international borders won’t be properly open for at least a year, according to the budget’s assumptions.

“Australia is coming back,” Treasurer Josh Frydenberg told parliament on Tuesday night.

“Employment is at a record high, with 75,000 more Australians in jobs than before the pandemic.

“This budget will help to create more than 250,000 jobs by the end of 2022-23,” Frydenberg said.

“This budget secures the recovery and sets Australia up for the future.”




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The deficit for next financial year is expected to be A$106.6 billion, with cumulative deficits of $342.4 billion over the forward estimates.

As the government continues to spend to underpin the recovery, net debt will increase to 30% of GDP at the end of June, before peaking at 40.9% at June 30, 2025.

Aged care centrepiece

The centrepiece of Frydenberg’s third budget – which had been largely pre-announced by the government – is a $17.7 billion aged care package, spent over five years and including 80,000 extra home care packages.

Frydenberg said this would make a total of 275,000 packages available. The present waiting list is 100,000.

The aged care package is designed as long term structural reform after the royal commission found the system in a parlous state and needing a comprehensive overhaul.

“We will increase the time nurses and carers are required to spend with their patients,” Frydenberg said.

“We will make an additional payment of $10 per resident per day to enhance the viability and sustainability of the residential aged care sector.

“We will support over 33,000 new training places for personal carers, and a new Indigenous workforce.

“We will increase access for respite services for carers.

“We will strengthen the regulatory regime to monitor to monitor and enforce standards of care.”

In other major initiatives, there is $2.3 billion for mental health, while the earlier-announced adjustment to the JobSeeker rate will cost nearly $9.5 billion over the budget period.

Tax cuts and a focus on women

Some 10.2 million low and middle income earners will benefit from the extension of the tax offset for another year, at a cost of $7.8 billion.

As Morrison seeks to repair his image with women, there is a range of measures on women’s safety, economic security, health and wellbeing totalling $3.4 billion.

This includes $1.7 billion for changes to child care, $351.6 million for women’s health, and $1.1 billion for women’s safety.

There will be another $1.9 billion for the rollout of COVID vaccines.

Quizzed at his news conference on the future of Australia’s closed border, Frydenberg hedged his bets. “When it comes to international borders, it’s an imprecise business.”

The budget papers assume a gradual return of temporary and permanent migrants from mid-2022, and small arrivals of international students, starting late this year and increasing from next year.

“The rate of international arrivals will continue to be constrained by state and territory quarantine caps over 2021 and the first half of 2022, with the exception of passengers from Safe Travel Zones.

“Inbound and outbound international travel is expected to remain low through to mid-2022, after which a gradual recovery in international tourism is assumed to occur,” the papers say.




Read more:
Budget 2021: the floppy-V-shaped recovery


The budget is heavy on continued help for business, with more than $20 billion extra in support.

With the country facing a skill shortage and skilled workers not able to enter, Frydenberg said the government would create more than 170,000 new apprenticeships at a cost of $2.7 billion.

“We will help more women break into non-traditional trades, with training support for 5,000 places,” he said

There will be 2,700 places in Indigenous girls academies to help them finish school and enter the workforce.

More STEM scholarships will be provided for women.

Another 5,000 places are being made available in higher education short courses.

Housing and support for retirees

The budget’s housing package includes another 10,000 places under the New Home Guarantee for first home buyers who build or buy a newly-built home. It will also increase the amount that can be released under the First Home Super Saver Scheme.

From July 1, 10,000 guarantees will be provided over four years to single parents with dependants to build or buy a home with a deposit as low as 2%.

Retirees will benefit from a measure to encourage them to downsize.

Older people will no longer have to meet a work test before they can make voluntary contributions to superannuation. People aged over 60 will be able to contribute up to $300,000 into their superannuation if they downsize.

Given the housing shortage, this is aimed at freeing up more housing for younger people.

The government will also enhance the Pension Loan Scheme by providing immediate access to lump sums of $12,000 for single people and $18,000 for couples.

Although modest, one measure that will help women, who retire on average with much less superannuation than men, is that the government will remove the $450-a-month minimum income threshold for the superannuation guarantee.

Frydenberg said the government was committing another $15 billion over a decade to infrastructure, including roads, airports and light rail.

There is also $1.2 billion for multiple measures to promote the digital economy.

Labor says it’s ‘just more of the same’

The opposition was dismissive. Anthony Albanese said, “Australians have endured eight long years of flat wages, insecure work and skyrocketing cost of living under the Liberals and Nationals – and this budget does nothing to change that.

“It’s just more of the same from a tired old government.”

The Business Council of Australia welcomed the budget, saying it “strikes a prudent balance between growth and fiscal discipline by making sensible investments in the levers of growth”.

But the ACTU said while the Coalition’s rejection of austerity was welcome, “the government has failed to use the spending in this budget to tackle the underlying problems of low wages and insecure jobs”.

Instead, it was “handing billions of dollars to business including in the critical areas of aged care, mental health and vocational training, with little accountability or strings attached”.

The Australian Aged Care Collaboration, which represents more than 1,000 providers, congratulated the government on agreeing to implement most of the royal commission’s 148 recommendations.

AACC representative Patricia Sparrow said “after 20 government reviews in 20 years, this budget, and the government’s response to the royal commission’s recommendations, finally addressed many of the challenges facing aged care”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Less hard hats, more soft hearts: budget pivots to women and care


WHYFRAME/Shutterstock

Danielle Wood, Grattan Institute and Tom Crowley, Grattan InstituteLast year’s post-budget photo ops were all heavy machinery and hard hats. But this year we can expect soft-focus shots with children and the elderly.

The big story of the budget is not just that the government is spending tens of billions more as we emerge from the recession; it is also the major shift in what the money will be spent on.

The change in fiscal strategy – from a “construction-led recovery” last year to a concerted emphasis on women and the care sector this year – is based on solid economic advice.

It has also come at the best possible time for a government that has been in the spotlight for underfunding aged care and mental health, and under pressure to do more to support women’s economic participation.

The treasurer was understandably eager to emphasise the Government’s new spending initiatives. And the shift is notable.

But while there is welcome progress, the budget falls short of delivering big structural reforms that are needed for childcare, aged care, and mental health.

Budget delivers on social spending

For childcare, the government has announced an extra $1.7 billion over three years starting from July 2022, a modest boost to the $9 billion the government spent last financial year.

We proposed a more ambitious package, which would have spurred big economic gains from higher female workforce participation.

The budget falls short of that, but it is still well targeted at the families that face the most crippling out-of-pocket childcare costs: those with two or more children under six in care.



For aged care, there is an extra $17.7 billion over four years, a significant increase to the $22.5 billion the government spent last financial year.

While not enough to deliver the Aged Care Royal Commission’s vision of a full rights-based model – where every Australian is entitled to the care they need – it still offers improvements.




Read more:
Budget splashes cash, with $17.7 billion for aged care and a pitch to women


The 80,000 new home care packages will help to reduce waiting times, and the boost to front line care minutes and the Basic Daily Fee provides additional support to those in residential care.

The accompanying focus on attracting, training, and up-skilling staff is particularly welcome given that the Royal Commission anticipates future staff shortages, although the Budget doesn’t have much specific to say about pay in the sector.




Read more:
View from The Hill: Frydenberg finds the money tree


For mental health, a sector whose problems have been laid bare by increased demand for services during the pandemic, there is an extra $2.3 billion over four years.

Funding is targeted towards expanding access to mental health services and bolstering suicide prevention, but it falls short of the system reform required.

A women-centric makeover

The budget flags $3.4 billion over four years for women’s measures (including childcare). Outside of childcare, the biggest are for women’s health ($365 million) and spending on women’s safety including and violence prevention ($1.1 billion).

These measures, particularly the increased spend on front line and response services for family violence are important and significant.

But the more significant shift for women comes with the recognition that job-creating budgets need to invest in a broader range of jobs including in services sectors. About 80% of Australians work in services (and 90% of working women), so investing in these jobs ensures a broader recovery than the previous hard-hat focus.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


While last year’s Budget ran hard on infrastructure and investment tax breaks that favour capital-intensive sectors, this time around there is a stronger focus on care economy jobs through the spend on aged care, childcare and mental health.

Even the extended JobTrainer scheme receives a care-centred makeover, with an additional 33,800 low fee and free training places set aside to support future aged care workers.

Services sectors hit hard by COVID also receive some cash including the already announced $1.2 billion support package for the aviation and tourism sector and $300 million for the creative and cultural sector. Universities again miss out but private education providers also receive additional supports.

The long-term challenge

Other major measures in the Budget include the rollover of the Low and Middle Tax Offset (the ‘lamington’) for another year – delivering up to $1080 into the hands of low- and middle-income taxpayers next year – and extension of two key business tax measures: instant expensing and loss carry backs – focused on bringing forward business investment.

The challenge is that much of this increased spending is permanent.

And when combined with the impact of COVID on migration and on the size of the economy, this leaves the medium-term forecasts looking markedly different to the (probably unrealistic) ones that voters were served up before the 2019 election.



But, as the Parliamentary Budget Office suggested a fortnight ago, even with this shift, Australia’s debt levels are sustainable and are likely to remain so. Net debt is forecast to stabilise and then fall over the medium term, even with continuing deficits.

This doesn’t mean that long-term structural challenges disappear, but it does mean that there is more breathing space for the government to let voters see its softer side. As an economic as well as political strategy, it makes a lot of sense.


The Conversation

Danielle Wood, Chief executive officer, Grattan Institute and Tom Crowley, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Frydenberg finds the money tree


Wes Mountain/The Conversation

Michelle Grattan, University of CanberraJosh Frydenberg’s third budget aims to give Australia a post-pandemic soft landing, using revenue windfalls for spending and tax cuts rather than for slashing the deficit.

Its philosophy is very much gain, not pain, for a population that has endured the stress of the pandemic, albeit not the devastation experienced by so many other countries.

There are plenty of winners, and minimal direct losers in a budget that lays the ground work for an election that is still expected next year rather than this.

Hard decisions have been eschewed. Prime Minister Scott Morrison is trying to avoid offending voters.

The political prism of this budget is very much in the moment. As such, it leaves Opposition Leader Anthony Albanese little room. Excessive criticism, and he risks sounding carping. Demands for too much more, and he might be accused of irresponsibility.

The $7.8 billion extension of the low and middle income tax offset is a carrot for Labor’s core constituency. Frydenberg told reporters the recipients were “the tradies and the truckies,” and “the teachers and the nurses”.

The budget dodges major reform, with the notable exception of aged care, which the royal commission’s scathing findings made unavoidable.




Read more:
Budget splashes cash, with $17.7 billion for aged care and a pitch to women


The deficit for the coming financial year is forecast to be $106.6 billion, only marginally below the December budget update forecast of about $108 billion.

Tens of billions of dollars in windfall revenue (from the faster-than-expected economic recovery, and high iron ore prices) have been distributed, rather than going to the bottom line.

At the end of the budget period, in 2024-25, the deficit will be an estimated $57 billion. Indeed, there is no surplus in sight in a decade.

Without a policy U-turn, Frydenberg as treasurer will likely never deliver that “back in black” budget. Indeed, by the time there is a surplus, he might have served as prime minister, been in opposition, and departed politics.

But of course, after the next election, at some point there will be a change of policy, towards fiscal consolidation.

Frydenberg presents an optimistic picture for the economy in the coming financial year, with the caveat that the pandemic lurks and therefore so does uncertainty.

The budget forecasts unemployment falling to 5% next year and dropping to 4.5% by June 2024. Growth peaks at 4.25% next financial year, but slows after that.

Critics will say that given the state of the economy, and the amount of revenue, budget repair is being delayed too long. That won’t, of course, be the judgement of the public.

We can apply many measuring sticks to the budget, beyond the spending-versus-repair one.

The most obvious is its response to the aged care royal commission. The government is putting some $17.7 billion into the system, and there will be 80,000 additional home care packages (the waiting list is 100,000).

The experts will argue over the money and probably conclude it is not enough. Equally, the test must be whether the initiatives adequately address improving regulation and achieving a larger, better trained and remunerated workforce. The government makes the right noises but the judgement can only come later. The workforce issues are particularly challenging.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The size of the task is enormous, with a planned new funding model to improve quality and a goal of cultural reform. Health Minister Greg Hunt on Tuesday described it as a “once in a generation” reform. The program will take five years.

As foreshadowed, there are many initiatives for women – on safety, health and economic security. Reforms to child care benefit families, but women especially will be making comparisons with the more generous, less targeted Labor scheme.

Many individuals and businesses will be scrutinising the budget for what it says about opening Australia back to the world.

The message is that it will be a slow path.

Migrants, temporary and permanent, will gradually start to come from mid next year.

Late this year, “small phased programs” of international students will start.

Inbound and outbound travellers will remain low for the next year.

But hey – it’s assumed “a population-wide vaccination program is likely to be in place by the end of 2021”. Let’s hope this is so – but it’s only an assumption.

By the end of next year, barring a fresh assault by the pandemic, we might – just might – be looking at more normality. And then we will be facing a more “normal” budget too, with its share of nasties.


The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Budget 2021: the floppy-V-shaped recovery


Lukas Coch/AAP

Richard Holden, UNSWI don’t often feel sorry for politicians. But having to manage a process that produces forecasts about the next four years of an economy still clawing its way out of a pandemic, and then having to publicly defend those forecasts, is no easy task.

That said, our compassion for the plight of Treasurer Josh Frydenberg shouldn’t stop us judging his budget forecasts. And, like all forecasts, those rest heavily on the assumptions that underpin them.

Core budget assumptions

The core budget assumptions about unemployment and economic growth are relatively rosy. Unemployment is forecast to be down to 4.75% by 2023-23 and 4.5% the year after – both well below pre-pandemic levels.

Real GDP growth is expected to rebound to 4.25% in 2021-22 and then settle down to about 2.5% thereafter. Given we are unlikely to have the population growth of the pre-COVID era, that’s a pretty high rate.

Taking a look graphically at actual and forecast GDP makes it clear why folks are talking about a “V-shaped recovery”. But even the fairly bullish assumptions reveal a recovery where the V isn’t really sharp enough. Call it a “floppy-V-shaped recovery.”



That’s rather disappointing, especially given Frydenberg has fundamentally shifted Liberal party fiscal strategy away from “debt and deficits” and dalliances with austerity, to one that sees government spending at more than 26% of GDP in steady state.

But what is more disappointing is that this increased spending isn’t forecast to translate into stronger employment and wages growth.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The budget forecasts an unemployment rate of 4.5% in 2023-24 and 2024-25. That’s better than pre-pandemic levels, but not all that close to the 4%-or-lower number many economists (including RBA governor Philip Lowe) think might be required to get wages growing meaningfully for the first time since 2013.

The budget forecasts reflect this, with wages growth of 2.25% in 2022-23 and 2.5% in 2023-24 both equal to forecast inflation in those years. That is, real wages growth is not even forecast to begin again until 2024-25—and even then, only barely.

Non-mining business investment is forecast to grow by 1.5% in 2021-22 and then jump by a massive 12.5% in 2022-23. That might reflect a post-COVID investment boom driven by a widely mRNA-vaccinated nation and a raft of government incentives. Or it might just be wishful thinking.




Read more:
View from The Hill: Frydenberg finds the money tree


As to immigration, we can expect our borders to be largely shut for the foreseeable future. This is reflected in the budget’s forecast population growth of “around 0.1% in 2020-21, 0.2% in 2021-22 and 0.8% in 2022-23.”

Whether immigration does actually pick up significantly in 2022-23 depends crucially on our vaccination rollout.

If we can reverse the bungled execution to date, overcome vaccine hesitancy, and secure enough Pfizer and Moderna doses (including for boosters) immigration might grow strongly again.




Read more:
Less hard hats, more soft hearts: budget pivots to women and care


But there are a number of things that have to go right for that to happen. And the government has a poor track record to date on those things.

And then there’s one notable assumption that makes news in every budget: the iron-ore price. The budget papers themselves highlight the importance of it, noting:

“The recent strength in key commodity prices, particularly iron ore, has seen a significant resurgence in Australia’s terms of trade […] As a result, nominal GDP is expected to grow by 3¾% in 2020-21, by a further 3½% in 2021-22 and by 2% in 2022-23.”

The budget assumes the iron-ore price will decline from its current level of over US$200 a tonne, to US$55 a tonne by March 2022. This incredibly pessimistic assumption basically gives the government a buffer on the headline deficit figure. If the forecast of a $99.3 billion deficit in 2022-23 is beaten significantly, it will likely be due to iron ore prices staying high.

The biggest assumption of all

The core economic assumptions discussed above underpin the budget bottom line – a number that used to receive considerably more attention when there was a question of “when” the budget might be back in surplus.

Those days are gone.

Frydenberg has engineered a remarkable shift in Liberal party economic philosophy. While maintaining their brand as “the party of lower taxes, not higher taxes”, they have jettisoned budget-balance fetishism.




Read more:
Cuts, spending, debt: what you need to know about the budget at a glance


Good. It’s about time.

But the biggest assumption of all in the out years of the budget is that the government – should it be reelected – sticks to this new strategy. If they do it holds the promise of being transformative.

It would represent a modest but welcome transformation of the economy, and a dramatic transformation of the Liberal Party brand.


The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Cuts, spending, debt: what you need to know about the budget at a glance


AAP/Shutterstock/The Conversation, CC BY-ND

Alexandra Hansen, The Conversation; Chynthia Wijaya, The Conversation, and Wes Mountain, The ConversationAfter twenty years of rhetoric from both sides of politics focusing on getting back to surplus, this year’s budget continues pandemic spending in the hope of getting the economy back on track as the pandemic starts to settle.

The projected deficit is $161 billion for 2021-22, but rather than tackling this in the next four years, the government’s focus is instead on payments and long-term serviceable debt.



The government is projecting a bump in real GDP growth in the next financial year, before growth settles again over the near future.



Part of the reason the government can afford to keep spending high is the low cost of international debt. This means that while net debt will continue to increase beyond the next four years the budget estimates cover, net interest payments should remain low.



And another major factor in the budget’s performance – despite the big spending – is the impact of a very high iron ore price, in the midst of a global pandemic.

The chart below shows the difference between policy decisions and other factors, generally beyond its control.



With a major focus on business and infrastructure spending to revive the economy, extensions to tax benefits and announced packages for childcare, there are many spending announcements in this year’s budget and very few cuts or savings.




Read more:
Frydenberg spends the budget bounty to drive unemployment down to new lows


The difference is so great that we have drawn out some of the major spending announcements and included all significant cuts in our headline figures for this year’s budget.


The Conversation

Alexandra Hansen, Deputy Editor and Chief of Staff, The Conversation; Chynthia Wijaya, Deputy Editor, Multimedia, The Conversation, and Wes Mountain, Multimedia Editor, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How worried should you be about coronavirus variants? A virologist explains his concerns


A COVID-19 patient in an ICU unit in a hospital in Capetown, South Africa, in December 2020. A variant emerged in South Africa that has since spread to other parts of the world. Other new variants could emerge elsewhere.
Rodger Bosch/AFP via Getty Images

Paulo Verardi, University of ConnecticutSpring has sprung, and there is a sense of relief in the air. After one year of lockdowns and social distancing, more than 171 million COVID-19 vaccine doses have been administered in the U.S. and about 19.4% of the population is fully vaccinated. But there is something else in the air: ominous SARS-CoV-2 variants.

I am a virologist and vaccinologist, which means that I spend my days studying viruses and designing and testing vaccine strategies against viral diseases. In the case of SARS-CoV-2, this work has taken on greater urgency. We humans are in a race to become immune against this cagey virus, whose ability to mutate and adapt seems to be a step ahead of our capacity to gain herd immunity. Because of the variants that are emerging, it could be a race to the wire.

A variant in Brazil is overwhelming the country’s health care system.

Five variants to watch

RNA viruses like SARS-CoV-2 constantly mutate as they make more copies of themselves. Most of these mutations end up being disadvantageous to the virus and therefore disappear through natural selection.

Occasionally, though, they offer a benefit to the mutated or so-called genetic-variant virus. An example would be a mutation that improves the ability of the virus to attach more tightly to human cells, thus enhancing viral replication. Another would be a mutation that allows the virus to spread more easily from person to person, thus increasing transmissibility.

None of this is surprising for a virus that is a fresh arrival in the human population and still adapting to humans as hosts. While viruses don’t think, they are governed by the same evolutionary drive that all organisms are – their first order of business is to perpetuate themselves.

These mutations have resulted in several new SARS-CoV-2 variants, leading to outbreak clusters, and in some cases, global spread. They are broadly classified as variants of interest, concern or high consequence.

Currently there are five variants of concern circulating in the U.S.: the B.1.1.7, which originated in the U.K.; the B.1.351., of South African origin; the P.1., first seen in Brazil; and the B.1.427 and B.1.429, both originating in California.

Each of these variants has a number of mutations, and some of these are key mutations in critical regions of the viral genome. Because the spike protein is required for the virus to attach to human cells, it carries a number of these key mutations. In addition, antibodies that neutralize the virus typically bind to the spike protein, thus making the spike sequence or protein a key component of COVID-19 vaccines.

India and California have recently detected “double mutant” variants that, although not yet classified, have gained international interest. They have one key mutation in the spike protein similar to one found in the Brazilian and South African variants, and another already found in the B.1.427 and B.1.429 California variants. As of today, no variant has been classified as of high consequence, although the concern is that this could change as new variants emerge and we learn more about the variants already circulating.

More transmission and worse disease

These variants are worrisome for several reasons. First, the SARS-CoV-2 variants of concern generally spread from person to person at least 20% to 50% more easily. This allows them to infect more people and to spread more quickly and widely, eventually becoming the predominant strain.

For example, the B.1.1.7 U.K. variant that was first detected in the U.S. in December 2020 is now the prevalent circulating strain in the U.S., accounting for an estimated 27.2% of all cases by mid-March. Likewise, the P.1 variant first detected in travelers from Brazil in January is now wreaking havoc in Brazil, where it is causing a collapse of the health care system and led to at least 60,000 deaths in the month of March.

Second, SARS-CoV-2 variants of concern can also lead to more severe disease and increased hospitalizations and deaths. In other words, they may have enhanced virulence. Indeed, a recent study in England suggests that the B.1.1.7 variant causes more severe illness and mortality.

Another concern is that these new variants can escape the immunity elicited by natural infection or our current vaccination efforts. For example, antibodies from people who recovered after infection or who have received a vaccine may not be able to bind as efficiently to a new variant virus, resulting in reduced neutralization of that variant virus. This could lead to reinfections and lower the effectiveness of current monoclonal antibody treatments and vaccines.

Researchers are intensely investigating whether there will be reduced vaccine efficacy against these variants. While most vaccines seem to remain effective against the U.K. variant, one recent study showed that the AstraZeneca vaccine lacks efficacy in preventing mild to moderate COVID-19 due to the B.1.351 South African variant.

On the other hand, Pfizer recently announced data from a subset of volunteers in South Africa that supports high efficacy of its mRNA vaccine against the B.1.351 variant. Other encouraging news is that T-cell immune responses elicited by natural SARS-CoV-2 infection or mRNA vaccination recognize all three U.K., South Africa, and Brazil variants. This suggests that even with reduced neutralizing antibody activity, T-cell responses stimulated by vaccination or natural infection will provide a degree of protection against such variants.

Stay vigilant, and get vaccinated

What does this all mean? While current vaccines may not prevent mild symptomatic COVID-19 caused by these variants, they will likely prevent moderate and severe disease, and in particular hospitalizations and deaths. That is the good news.

However, it is imperative to assume that current SARS-CoV-2 variants will likely continue to evolve and adapt. In a recent survey of 77 epidemiologists from 28 countries, the majority believed that within a year current vaccines could need to be updated to better handle new variants, and that low vaccine coverage will likely facilitate the emergence of such variants.

What do we need to do? We need to keep doing what we have been doing: using masks, avoiding poorly ventilated areas, and practicing social distancing techniques to slow transmission and avert further waves driven by these new variants. We also need to vaccinate as many people in as many places and as soon as possible to reduce the number of cases and the likelihood for the virus to generate new variants and escape mutants. And for that, it is vital that public health officials, governments and nongovernmental organizations address vaccine hesitancy and equity both locally and globally.

[Insight, in your inbox each day. You can get it with The Conversation’s email newsletter.]The Conversation

Paulo Verardi, Associate Professor of Virology and Vaccinology, University of Connecticut

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Prolonged brain dysfunction in COVID-19 survivors: A pandemic in its own right?


COVID-19 survivors face not only physical symptoms. A large study recently showed that their mental health is affected, too.
FG Trade/Getty Images

Chris Robinson, University of FloridaOne in three survivors of COVID-19, those more commonly referred to as COVID-19 long-haulers, suffered from neurologic or psychiatric disability six months after infection, a recent landmark study of more than 200,000 post-COVID-19 patients showed.

Researchers looked at 236,379 British patients diagnosed with COVID-19 over six months, analyzing neurologic and psychiatric complications during that time period. They compared those individuals to others who had experienced similar respiratory illnesses that were not COVID-19.

They found a significant increase in several medical conditions among the COVID-19 group, including memory loss, nerve disorders, anxiety, depression, substance abuse and insomnia. Additionally, the symptoms were present among all age groups and in patients who were asymptomatic, isolating in home quarantine, and those admitted to hospitals.

The results of this study speak to the seriousness of long-term consequences of COVID-19 infection. Numerous reports of brain fog, post-traumatic stress disorder, heart disease, lung disease and gastrointestinal disease have peppered the media and puzzled scientists over the past 12 months, begging the question: What effect does COVID-19 have on the body long after the acute symptoms have resolved?

I am an assistant professor of neurology and neurosurgery and can’t help but wonder what we have learned from past experience with other viruses. One thing in particular stands out: COVID-19 consequences will be with us for quite some time.

Red Cross volunteers from 1918 wearing masks.
Red Cross volunteers during the 1918 flu pandemic.
Apic/Getty Images

Learning from history

Past virus outbreaks, such as the 1918 flu pandemic and the SARS epidemic of 2003, have provided examples of the challenges to expect with COVID-19. And, the long-term effects of other viral infections help provide insight.

Several other viruses, including a large majority of those that cause common upper and lower respiratory infections, have been shown to produce such chronic symptoms as anxiety, depression, memory problems and fatigue. Experts believe that these symptoms are likely due to long-term effects on the immune system. Viruses trick the body into producing a persistent inflammatory response resistant to treatment.

Myalgic encephalomyelitis, also known as chronic fatigue syndrome, is one such illness. Researchers believe this condition results from continuous activation of the immune system long after the initial infection has resolved.

In contrast to other viral infections, the COVID-19 survivors in the study reported persistent symptoms lasting more than six months, with no significant improvement over time. The abundance of psychiatric symptoms was also notable and likely attributable to both infection and pandemic-related experience.

These findings are leading researchers to hypothesize several mechanisms following acute COVID-19 infection that may lead to long-haul COVID-19. With the known historical context of chronic symptoms following other viruses, doctors and researchers may have a glimpse into the future of COVID-19 with the potential to create therapies to alleviate patients’ persistent symptoms.

A male psychiatrist who had COVID-19.
Scott Krakower, a psychiatrist, poses in front of his home on July 8, 2020 in Port Washington on Long Island, N.Y. Krakower is a COVID-19 long-hauler.
Johannes Eisele/AFP via Getty Images

When does COVID-19 really end?

COVID-19 is now known to be a disease that affects all organ systems, including the brain, lungs, heart, kidneys and intestines.

Several theories exist as to the cause of chronic, lingering symptoms. Hypotheses include direct organ damage from the virus, continual activation of the immune system after acute infection and persistent lasting virus particles that find safe harbor within the body.

To date, autopsy studies have not confirmed the presence or overabundance of COVID-19 particles in the brain, making the immune theories the most likely cause of brain dysfunction.

Some recovered COVID-19 patients detail significant improvement or resolution of long symptoms following inoculation with the COVID-19 vaccine. Others report improvement following a short course of steroids. The most plausible explanation for the direct effects of long COVID-19 on the brain are due to its body-wide connections and the fact that COVID-19 is a multi-organ disease.

These findings may point to a direct immune related cause of long COVID-19, though no real answers yet exist to define the true cause and duration of the disease.

The post-COVID-19 world

In February, the National Institutes of Health announced a new initiative to study long COVID-19, now collectively defined as Post-Acute Sequelae of SARS-CoV-2. The NIH created a fund of US$1.15 billion to study this new disease. The aims of the study include the cause of long-term symptoms, the number of people affected by the disease and vulnerabilities leading to long COVID-19.

In my view, public health officials should continue to be open and transparent when discussing the short- and long-term effects of COVID-19. Society as a whole needs the best information possible to understand its effects and resolve the problem.

COVID-19 remains and will continue to be one of the largest socioeconomic problems across the world as we begin to recognize the true long-term impacts of the disease. Both the scientific and research communities should continue to be diligent in the fight long after the acute infections are gone. It appears that the chronic effects of the disease will be with us for some time to come.

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Chris Robinson, Assistant Professor of Neurology and Neurosurgery, University of Florida

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Taking one for the team: 6 ways our cells can die and help fight infectious disease


White blood cells dying.

Georgia Atkin-Smith, La Trobe University and Ivan Poon, La Trobe UniversityWe have all heard of COVID-19, the flu and bacterial infections. But what is actually happening to our cells when we contract these diseases? Many of our body’s cells don’t live to tell the tale. But cell death isn’t necessarily a bad thing — in fact, the death of infected cells can provide a sacrificial mechanism to stop pathogens in their tracks before they can spread through our body.

Over the years, researchers have realised there are many ways for our cells to die. Our genetics contain a comprehensive “licence to die”, with the route to cell death dictated by both the type of the cell and the pathogen. Let’s check some out:

The dancing death

In the time it takes you to read this sentence, ten million cells in your body will have died, through a type of death called apoptosis. This term, coined in 1972 by Australian pathologist John Kerr, comes from the Greek phrase for “leaves falling from a tree”.

Apoptosis is the most common form of cell death, and has also been nicknamed the “dance of death”, because of the extraordinary shape changes exhibited by the cells under a microscope as they sacrifice themselves.

For example, apoptotic cells dying from radiation or infection with influenza A virus (aka, the flu) generate large, bubble-like structures on their surface called blebs, before shooting out long beaded necklace-like protrusions and finally shattering into pieces.

The death of flu-infected cells is suggested to both aid and limit viral spread. Nevertheless, it’s a spectacular event to witness (and an excellent reminder to get your flu shot this winter).

White blood cell blebbing and dying.

Out with a bang

Vaccinia virus is used worldwide to vaccinate against smallpox. In fact, it was the very first vaccine, developed in 1796 by Edward Jenner.

We now also know that vaccinia virus can make our cells more sensitive to a particular type of cell death, caused by a molecule called TNF. This can help prevent the disease spreading by killing off infected cells before the virus has a chance to replicate.

Many of our cells have a roughly spherical or balloon-like shape, encapsulated by a protective layer called the cell membrane. Just like bursting a balloon with a pin, puncture to the cell membrane marks the point of no return.

This process occurs during necroptosis — an explosive type of cell death in which proteins inside the cell punch holes in the membrane. The cell pops and dies, shutting down the machinery needed for viral replication.

The spider web of death

When they aren’t busy haunting our nightmares, spiders can be found weaving silken masterpieces of extraordinary detail and strength. The web of a golden orb weaving spider, for example, is strong enough to entangle small birds.

On a smaller but equally impressive scale, our immune system contains specialised cells called neutrophils that can weave a deadly web of their own and entrap bacteria. Neutrophils gallantly sacrifice themselves in the process of casting their web, in a type of cell death perhaps fittingly called NETosis.

When infected with bacteria such as Streptococcus pneumoniae, which causes pneumonia and meningitis, neutrophils eject a specialised web made from their own DNA. These webs can entangle nearby bacteria to prevent their escape until other immune cell reinforcements arrive to clear the infection. Sometimes, proteins found in these webs can also kill the bacteria – quite an impressive defence mechanism!

Cartoon illustrating different forms of cell death
There are a surprising number of ways cells can lay down their lives for the greater good.
Author provided

The last meal

Just as our bodies are compartmentalised into organs such as the stomach, liver or heart, our individual cells also have specialised compartments. One of the cell’s “stomachs” (a structure called the “autophagosome”) engulfs and digests cellular contents such as damaged molecules through the process of autophagy.

However, in some circumstances, the machinery that drives this Pac-Man-style action can also facilitate the cell’s demise. Coincidentally, the bacteria Helicobacter pylori can infect cells of the human stomach lining, called epithelial cells, which can cause ulcers and gastritis. The cells can respond with a process called autophagic cell death, in which the induction of autophagy causes the cell to die.

A fiery death

Pyromania, derived from the Greek word pyr, meaning fire, is an obsessive desire to set things ablaze. Some of our immune cells also have the ability to self-immolate and cause inflammation as part of our response to infection.

Since its relatively recent discovery in 2001, this type of cell death, called pyroptosis, has become a hot topic (sorry) among cell biologists, and is often facilitated by a molecular complex called the inflammasome.




Read more:
What is autoinflammatory disease, the rare immune condition with waves of fever?


In 2021, understanding pyroptosis is more important than ever, as it has been linked to infection with SARS-CoV-2 infection, the virus that causes COVID-19.

Activation of the factors that cause pyroptosis may help explain the excessive inflammation seen in patients with severe COVID-19. And this could potentially offer a new way to combat the disease.

Overdosing on iron and fat

There’s no doubt the key to a long and healthy life is a balanced diet and exercise. However, sometimes we can’t resist the urge to devour a burger and fries with ice cream for dessert. With enough hard work, we can burn it off again. But for individual cells, overindulging can be fatal.

Too much iron and/or harmful types of fat molecules can cause cells to die by ferroptosis. Cells infected with Mycobacterium tuberculosis, the bacterium that causes TB, can increase their iron content and cause ferrototic cell death! Pass the salad, thanks.




Read more:
Tick, tock… how stress speeds up your chromosomes’ ageing clock


The survival of the human body is a fine balancing act between cell growth and cell death. Understanding our cells’ complex “licence to die” could give us new ways to combat disease.The Conversation

Georgia Atkin-Smith, Research scientist, La Trobe University and Ivan Poon, Associate Professor, Biochemistry, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.