Sydney’s delta variant outbreak puts ‘COVID-zero’ Australia on high alert

The outbreak in Sydney now numbers about 130 cases, with 18 more infections announced by New South Wales state on Monday. Contact tracers are battling to keep up with a growing list of exposure sites, including some domestic Virgin Australia flights after a cabin crew member tested positive for the virus.

Residents of Greater Sydney have been ordered to stay home except for exercise, essential shopping and medical treatment until July 9, while Darwin, the capital of the Northern Territory, is under a snap 48-hour lockdown. Queensland state on Sunday imposed additional restrictions, while Perth and Canberra have made mask-wearing mandatory in public for the first time since the pandemic began.

The clusters show the limits of Australia’s so-called “COVID-zero” strategy, which has relied on closed international borders and rigorous testing to eliminate community transmission of the virus. While nations such as the U.K. and U.S. are preparing to open up their economies after widespread vaccinations, a slow rollout in Australia means the economy, and particularly domestic tourism, remains vulnerable.

The S&P/ASX 200 index fell 0.4% as of 10:47 a.m. as investors assessed the impact of the two-week lockdown in Sydney, with travel and tourism shares declining.

“The threat that the delta strain could meaningfully spread to other states as well means that there is significant downside risk to our forecast that the Australian economy is going to perform really strongly this year,” said Katrina Ell, an economist at Moody’s Analytics Inc. in Sydney. “Until the vaccine really speeds up, the Australian economy is going to be really vulnerable to a fit and start recovery mode as we continue to see these localized outbreaks.”

Doses administered so far in Australia are only enough to cover 14% of the population, compared with 50% in the U.S. and 57% in the U.K., according to Bloomberg’s COVID-19 Vaccine Tracker.

In response to the clusters emerging around Australia, states and territories are reimposing domestic border restrictions, while a quarantine-free travel bubble between Australia and New Zealand has been suspended.

Tourism operators are warning the localized lockdowns are playing havoc with their industry, while the Australian Retailers Association says the Sydney lockdown is expected to cause lost trade totaling about A$1 billion ($759 million) a week.

The Northern Territory’s cluster is linked to a worker at a Newmont Corp. gold mine in the Tanami Desert in central Australia, placing hundreds of employees in isolation and raising fears the virus could leak into the vulnerable indigenous population.

The Sydney outbreak likely started with a driver who was infected while transporting international flight crews.

Prime Minister Scott Morrison’s government is under pressure to ramp up vaccine delivery, a program that’s been complicated by community concern about blood clots from the AstraZeneca Plc shot. The government is recommending that vaccine only be given to people aged over 60.

Along with the tardy vaccine rollout, Morrison has also been criticized by the main opposition Labor party for a policy of quarantining returned overseas travelers in city-center hotels. The virus has leaked into communities about 20 times via infected hotel security guards and cleaners, or travelers who caught the virus during quarantine, potentially due to poor room ventilation, and only tested positive after their release.

A Newspoll published in the Australian Monday showed Morrison’s conservative coalition slipping 2 percentage points to trail Labor, 49% to 51%. An election needs to be held by May.