Australia’s COVID response cost 68 times more than benefits delivered
Why have the federal and state governments of Australia conspicuously failed to provide a cost-benefit analysis of their COVID-era policies?
The cost of Australia’s COVID lockdowns has been at least 68 times greater than the benefits they delivered, according to a recent analysis of the societal, economic and health merits of lockdown policies enforced through the COVID pandemic.
While all lockdowns and the large majority of COVID restrictions have been lifted since they were first introduced in April 2020, there has been no government-issued cost-benefit analysis that transparently estimates and weighs all known or expected benefits and all known or expected harms of the major covid-era policies, said Gigi Foster, Professor of Economics at UNSW Business School.
“No such analysis has been forthcoming in Australia to provide a justification for the COVID lockdowns, despite such a requirement being deeply embedded in the standard policy processes of Australia. Governments have still, to this day, not delivered a justification for their policies in the standard way that policies are usually justified, where you take a policy and weigh up the benefits and then weigh up the costs, and then you compare the two to see if there is a net benefit,” she said.
“And then you look at other policies you could pursue with the same resources that you were planning for the first one and ask if the net benefit of that policy is bigger and better – then you choose the policy that gives you the most bang for the buck. That is normally what is supposed to happen, not just in Australia but overseas as well, where economists beaver away on policy evaluation in back rooms. That's what they do; it's the bread and butter of working economists.
“But the federal and state governments here in Australia have conspicuously failed to provide such a defence of their policies, which simply underscores point one – which is that this suite of policies could not possibly be defended on the basis that it actually, on net, delivered better human health outcomes than some other policy that could have been pursued.”
A cost-benefit analysis model of COVID
Prof. Foster’s co-authored work (subsequently published as a book) Do lockdowns and border closures serve the “greater good”? A cost-benefit analysis, concludes that, on net, the costs of Australia’s COVID lockdowns have been at least 68 times greater than the benefits they delivered.
In framing her analysis, Prof. Foster notes that there is a prevalent misconception that cost-benefit analyses are about money. However, she states that they are in fact about social welfare, and she explains that the approach taken in her analysis considers statistical lives lost now and in the future. It also counts, for example, the mental health suffering that people endure when they are locked inside their homes.
The human welfare costs of lockdowns are put into a currency (quality-adjusted life years, or QALY) that is used to enumerate both current and projected costs and benefits of the lockdowns. The analysis also uses a newly created measure (the wellbeing year, or WELLBY) to capture some lockdown costs. Since one year of average healthy life (one QALY) equates to six WELLBYs experienced by a person for one year, she said this allows suffering across the society in various dimensions to be compared with benefits in the same welfare ‘currency’.
The research analysis calculated 12,304 deaths as the upper-end estimate for the number of COVID deaths that could have occurred in Australia during 2020 and 2021 without lockdowns and border closures. However, there were in fact 2353 COVID deaths in Australia in these two years (even in the presence of lockdowns), so at most Prof. Foster said 9951 COVID deaths were avoided by lockdown policies. On average, she said a COVID death represents a loss of three to five QALYs, since on average such a death occurs in someone already significantly advanced in age and not in good health. Prof. Foster used the higher figure of five in her analysis, to be generous to lockdowns.
To this, based on estimates of the incidence and severity of long COVID, she said 2 per cent of the estimated losses in the form of COVID deaths can be added, to account for the human cost of long-COVID effects. “One can also add an estimated 131 deaths by homicide and traffic accidents, often of a significantly younger age than the average COVID victim, that would have occurred in a no-lockdown regime,” added Prof. Foster, who provided the following upper-end estimate for the total benefit of lockdowns: [9951 (total COVID deaths averted) x 5 (healthy years lost per COVID death) x 6 (WELLBYs per QALY) x 1.02 (estimate for long COVID)] + [131 (non-COVID deaths averted) x 50 (healthy years lost per each such death) x 6 (WELLBYs per QALY)] which equals 343,800 WELLBYs, or 57,300 QALYs, in total. Dividing this total by 24 (the number of months in two years) equals approximately 14,325 WELLBYs saved per month of lockdown.
“So I estimate the maximum benefits from lockdown policies to be 343,800 WELLBYs. By comparison, I estimate the minimum costs from lockdowns, considering all dimensions of human suffering that they created in the short and long run, to be 23.41 million WELLBYs. This indicates that the costs of Australia’s COVID lockdowns have been at least 68 times greater than the benefits they delivered. Since I have made assumptions that are extremely favourable to the government’s choice to pursue a lockdown strategy, the true ratio of costs to benefits of the Australian COVID lockdowns is likely greater than this,” she said.
How can the government begin to repair the damage?
Prof. Foster said there are important steps the government can and should take to encourage growth of the economy, employment and improve the national welfare of Australia. “The first job is to get out of the way,” she affirmed. “Stop with the overreach. Stop with all of the COVID paraphernalia that has really crushed small- and medium-sized businesses during this period and just handed favours to the big businesses that were able to absorb the extra costs of compliance. So just get out of the way and stop the expenditure on the COVID bloated bureaucracy. Focus on core business – which is to provide conditions for free enterprise to thrive, to encourage competition, and to provide a fair and level playing field for organisations, regardless of whether they are big or small.”
Prof. Foster also said the government needs to recommit to the pandemic management plans that were in place in early 2020. “Since April 2020, government responses to the COVID pandemic have had little to do with public health promotion, and everything to do with political incentives, money and power,” explained Prof. Foster, who said this observation is clear if two questions are asked.
“First, what would normally be done in response to a respiratory pandemic, that wasn't done? And second, what things (apart from protection from COVID) that define human health and wellbeing were not considered in government responses? For about two years, health was simply redefined as protection from COVID. And that was a fatal mistake – literally a fatal mistake for many Australians. The government simply ignored the distillation of public health experience and knowledge of many generations, embodied in the existing pandemic management plans in Australia and overseas in early 2020. They were summarily scrapped and put in the garbage bin in March 2020. And if we had simply followed those plans, I think we would have had a much better outcome all around.”
Third, another policy Prof. Foster has been advocating for years is childcare, available to anyone in Australia for little or preferably no cost. “You need to design that policy very carefully, but it’s an obvious one for the government because it's not being well provided at the moment,” she said.
“Instead, the government needs to encourage the parents of children to join the labour market if they wish to, by making childcare accessible. It also needs to reduce red tape, because the government is actually getting in the way by over-regulating the childcare industry, and this discourages labour from entering the childcare market. The government can invest in the next generation of Australians by funding really high-quality early learning through childcare. It's an obvious triple win for the government and for society – and we should get onto that immediately.”
Gigi Foster is a Professor in the School of Economics at UNSW Business School. She works in diverse fields including education, social influence, corruption, lab experiments, time use, behavioural economics, and Australian policy. For more information please contact Prof. Foster or read the executive summary of Do lockdowns and border closures serve the “greater good”? A cost-benefit analysis.