Why the RBA should cut today

First, the update today:

And charting the current daily growth rate of new cases gives us this parabolic curve:

By the time of the March meeting there will be roughly 300k total cases. By the time of the April meeting that number will be approaching 1.1m cases. But that doesn’t account for the virus taking off in cities outside of Wuhan which is exactly what The Lancet predicts:

Background

Since Dec 31, 2019, the Chinese city of Wuhan has reported an outbreak of atypical pneumonia caused by the 2019 novel coronavirus (2019-nCoV). Cases have been exported to other Chinese cities, as well as internationally, threatening to trigger a global outbreak. Here, we provide an estimate of the size of the epidemic in Wuhan on the basis of the number of cases exported from Wuhan to cities outside mainland China and forecast the extent of the domestic and global public health risks of epidemics, accounting for social and non-pharmaceutical prevention interventions.

Methods

We used data from Dec 31, 2019, to Jan 28, 2020, on the number of cases exported from Wuhan internationally (known days of symptom onset from Dec 25, 2019, to Jan 19, 2020) to infer the number of infections in Wuhan from Dec 1, 2019, to Jan 25, 2020. Cases exported domestically were then estimated. We forecasted the national and global spread of 2019-nCoV, accounting for the effect of the metropolitan-wide quarantine of Wuhan and surrounding cities, which began Jan 23–24, 2020. We used data on monthly flight bookings from the Official Aviation Guide and data on human mobility across more than 300 prefecture-level cities in mainland China from the Tencent database. Data on confirmed cases were obtained from the reports published by the Chinese Center for Disease Control and Prevention. Serial interval estimates were based on previous studies of severe acute respiratory syndrome coronavirus (SARS-CoV). A susceptible-exposed-infectious-recovered metapopulation model was used to simulate the epidemics across all major cities in China. The basic reproductive number was estimated using Markov Chain Monte Carlo methods and presented using the resulting posterior mean and 95% credibile interval (CrI).

Findings

In our baseline scenario, we estimated that the basic reproductive number for 2019-nCoV was 2·68 (95% CrI 2·47–2·86) and that 75 815 individuals (95% CrI 37 304–130 330) have been infected in Wuhan as of Jan 25, 2020. The epidemic doubling time was 6·4 days (95% CrI 5·8–7·1). We estimated that in the baseline scenario, Chongqing, Beijing, Shanghai, Guangzhou, and Shenzhen had imported 461 (95% CrI 227–805), 113 (57–193), 98 (49–168), 111 (56–191), and 80 (40–139) infections from Wuhan, respectively. If the transmissibility of 2019-nCoV were similar everywhere domestically and over time, we inferred that epidemics are already growing exponentially in multiple major cities of China with a lag time behind the Wuhan outbreak of about 1–2 weeks.

Interpretation

Given that 2019-nCoV is no longer contained within Wuhan, other major Chinese cities are probably sustaining localised outbreaks. Large cities overseas with close transport links to China could also become outbreak epicentres, unless substantial public health interventions at both the population and personal levels are implemented immediately. Independent self-sustaining outbreaks in major cities globally could become inevitable because of substantial exportation of presymptomatic cases and in the absence of large-scale public health interventions. Preparedness plans and mitigation interventions should be readied for quick deployment globally.

And here’s the kicker:

Figure 4 shows the epidemic curves for Wuhan, Chongqing, Beijing, Shanghai, Guangzhou, and Shenzhen with a R₀ of 2·68, assuming 0%, 25%, or 50% decrease in transmissibility across all cities, together with 0% or 50% reduction in inter-city mobility after Wuhan was quarantined on Jan 23, 2020. The epidemics would fade out if transmissibility was reduced by more than 1–1/R₀=63%. Our estimates suggested that a 50% reduction in inter-city mobility would have a negligible effect on epidemic dynamics. We estimated that if there was no reduction in transmissibility, the Wuhan epidemic would peak around April, 2020, and local epidemics across cities in mainland China would lag by 1–2 weeks. If transmissibility was reduced by 25% in all cities domestically, then both the growth rate and magnitude of local epidemics would be substantially reduced; the epidemic peak would be delayed by about 1 month and its magnitude reduced by about 50%. A 50% reduction in transmissibility would push the viral reproductive number to about 1·3, in which case the epidemic would grow slowly without peaking during the first half of 2020. However, our simulation suggested that wholesale quarantine of population movement in Greater Wuhan would have had a negligible effect on the forward trajectories of the epidemic because multiple major Chinese cities had already been seeded with more than dozens of infections each (results not shown because they are visually indistinguishable from figure 4). The probability that the chain of transmission initiated by an infected case would fade out without causing exponential epidemic growth decreases sharply as R₀ increases (eg, <0·2 when R₀>2).As such, given the substantial volume of case importation from Wuhan (figure 3), local epidemics are probably already growing exponentially in multiple major Chinese cities. Given that Beijing, Shanghai, Guangzhou, and Shenzhen together accounted for more than 50% of all outbound international air travel in mainland China, other countries would likely be at risk of experiencing 2019-nCoV epidemics during the first half of 2020.

The economic consequences of this are obvious in a massive, cross-sectoral, income shock for Australia as China all-but shuts down in the fight to stamp it out.

That will make for an endonegous and exogenous combined shocking hitting an already weak economy.

The RBA should make an insurance cut this afternoon. If not, it will be cutting in a panic in March.