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In New Zealand, around 5% of adults and 20% of children suffer from an influenza-like illness in a typical year. The spread of influenza is usually limited by immunity among the population due to past infection or vaccination. However, if a new influenza virus emerges that people have little or no immunity to, it can spread rapidly infecting large proportions of the population in a short space of time and in some cases cause a pandemic. During the last three centuries influenza pandemics appear to have occurred on two or three occasions each century (Appendix pp 60-61 Woodson, Baker, Roberts and Jennings 2005). This pattern is thought to reflect the instability of the genetic structure of influenza viruses and the corresponding variation in resistance to influenza within populations.

Pandemics in recent times are considered to have originated in East Asia and spread across the world involving a process that can take several years. The 1957 “Asian flu” for example started in China and via Hong Kong’s nexus of trade routes the virus spread rapidly throughout South East Asia then to Europe and North America. The 1968 “Hong Kong flu” is also thought to have originated in China and spread to other parts of the world through Hong Kong. Its diffusion pattern was different to the 1957 pandemic, probably reflecting the increase in air travel. The origin of the virus that caused the global pandemic of 1918 is less clear (Taubenberger and Morens 2006).

The current risk of a global influenza pandemic is largely due to the spread of avian influenza (H5N1 in particular) among birds and other animals in Asia, the Middle East, Africa and Europe. The H5N1 virus was evidently first identified in South Africa in 1961 and until recently there had been no human cases of the disease (Barry, 2004). The first known infections of humans occurred in Hong Kong in 1997 killing six of the eighteen known victims. Crisis management by the Hong Kong government contained the spread of the virus. Nevertheless, circulation of the virus in wild birds has resulted in further outbreaks. Despite the slaughter of millions of poultry the virus is now endemic in many parts of Asia and has recently been discovered in parts of Europe, the Middle East and Africa. By March 2006 outbreaks of H5N1 among poultry, wild birds and other animals had been confirmed in 45 countries (World Organisation for Animal Health 2006).

Although the H5N1 influenza virus’s natural home is in birds, exposure to the virus can infect humans directly. However, avian viruses do not typically transmit from person to person, to do so they must mutate or exchange genes with another virus that can spread between humans. Recent evidence suggests that the less severe pandemics of the last century, in 1957 and 1968, were caused by viruses with genes from both human influenza and avian influenza viruses (October 22, The Economist 2005). Recent research also suggests that the H1N1 strain of influenza that caused the severe 1918 pandemic was a strain of avian flu (Gamblin et al. 2004).

According to Dr Julie Gerberding, Director, Centers for Disease Control and Prevention, “For an influenza virus to cause a pandemic, it must meet three major criteria: (1) possess a new surface protein to which there is little or no pre-existing immunity in the human population; (2) be able to cause illness in humans; and (3) have the ability for sustained transmission from person to person. So far, the H5N1 virus has met two of these three criteria, but it has not yet shown the capability for sustained transmission from person to person.”[3]

More than half of those known to have been infected with H5N1 died as a result.

As of 24th of March 2006, 186 people were known to have been infected with the H5N1 virus since 2003, and 105 people have died as a result (World Health Organisation 2006). These infections have occurred as a result of contact with infected birds, there is no evidence that the virus has mutated into a form that could be transmitted between humans. If human to human transmission does occur, there is potential for the virus to cause a global influenza pandemic as humans would have little immunity to the new influenza strain.

Evaluating the potential human and economic cost of such a pandemic is however fraught with uncertainty. There is epidemiological uncertainty about whether H5N1 will develop the ability for sustained transmission from person to person and if it does, there is uncertainty about the potential infection rate and case fatality rates. Historically influenza pandemics have had infection rates ranging between twenty and forty percent (Taubenberger 2005). Michael Osterholm, Associate Director of the US Department of Homeland Security’s National Centre for Food and Defence, takes the view that recent clinical, epidemiological, and laboratory evidence suggests that the impact of a potential pandemic caused by the current H5N1 strain could be similar to that of the 1918 pandemic (Osterholm 2005). The 1918 flu is believed to have killed around 50 million people worldwide[4], and was particularly lethal for people in the 20 to 40 year age bracket. Total deaths in New Zealand attributed to the pandemic are estimated to have been close to 8,600 (Rice 2005, p221), in excess of 0.8 percent of the population.

There is little research on the economic effects of past influenza pandemics.

As a result of epidemiological uncertainty and significant differences in social, political and economic conditions prevailing during previous pandemics there is inevitably uncertainty about the potential economic impact of a pandemic. Despite the severity of the impact of the 1918 pandemic on human life, there is scant international research available evaluating its economic impact. Although recent research suggests there may be long-run economic effects of pandemics, the conclusions from this strand of research are unclear (Almond 2005, Bloom and Mahal 1995, Brainerd and Siegler 2003). Nevertheless, estimates by Lee and McKibbin (2003) of the economic impact of the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 suggest that the short-run disruption to GDP growth of a pandemic could be significant. Similarly, despite a comparatively low infection rate, Cooper and Coxe (2005) estimate that the outbreak of SARS in Toronto reduced annual Canadian GDP by as much as 0.6 percentage points.[5]

The impact of previous pandemics on the New Zealand economy has received little attention. Official reports on the 1918 pandemic by the Influenza Epidemic Commission (1919) and by Mackgill (1919) concentrate on infection and mortality rates and the public health sector response to the crisis. In a comprehensive account of the course of the 1918 influenza pandemic in New Zealand, Rice (2005) comments that there was widespread public criticism of the Government’s handling of the pandemic, in particular the delay in taking seriously the potential threat of the virus, casual and ineffective quarantine restrictions, and inadequate coordination between central and local agencies. These factors may have contributed to a higher infection and death rate in New Zealand than in Australia.[6]

Nevertheless, despite relatively high infection and death rates in New Zealand, Rice proffers the view that the cost of additional health care was insignificant and the cost to the business community was moderate. He notes that “The financial year 1918-19 showed a lower profit than usual, from lost sales and production, but there were no dramatic business collapses attributable to the pandemic.” And that “the economic effect of the epidemic seems to have been incidental because it was over so quickly” (Rice 2005, p 259).

Unusual conditions prevailing in 1918 no doubt accentuated the spread and virulence of the “Spanish flu”,[7] notably the war conditions, the priority given to the war effort, the lack of international cooperation, and lack of preparedness and information available to the public.[8] However, a number of factors suggest that a similar outbreak could today have more severe economic effects. While international monitoring and cooperation are now more effective, the rapid growth in international trade and travel and the vastly larger numbers of at risk animals and poultry in Asia have increased the risk of global contagion. The risks of contagion within New Zealand have probably also increased significantly since 1918 and perhaps in ways that have accentuated the need for “social distancing” and therefore the potential economic cost of a similar type of influenza outbreak. In particular, greater urbanisation of the population and the growth of services have increased person to person contact on a daily basis. In 1916 approximately 29% of the labour force was employed in the primary sector and about 54% of the population lived in rural areas, where the risk of infection was probably lower. In 2001 only 8% worked in the primary sector and only 14% lived in rural areas.


  • [3]Testimony of Julie L. Gerberding before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives, May 26, 2005
  • [4]This estimate is from Johnson and Mueller (2002) who note that successive estimates have continuously raised the death rate from the 1918 pandemic estimate as more reliable records have come available, prompting some to suggest that the death toll may have been even higher and closer to 100 million.
  • [5]In Toronto the infection rate was comparatively low, 252 people were infected and 44 people died. The majority of the economic impact came from heavily reduced tourism and the disruption to normal business because of quarantine and health concerns.
  • [6]Australia adopted for example a more vigilant approach to quarantining ships. Although Australia was still unable to prevent the outbreak of the pandemic, it occurred later and the death rate in Australia was estimated at less than half that for New Zealand (Rice, p 253).
  • [7]Although commonly referred to as the “Spanish Flu”, the 1918 influenza pandemic is thought to have started in Kansas in early 1918 and was transferred to US Army cantonments. From there it followed troop movements to army bases throughout the US and to Europe. It spread through Europe, including Spain, infecting the Allied and German troops. By June and July it had reached Greece, Bombay and Shanghai. In September it reached Australia and New Zealand. Spain, being a neutral country, was the first to officially record and report the spread of the influenza virus and hence it was referred to as the “Spanish Flu” (Chapter 14, Barry 2004)
  • [8]See for example Barry (2004) and Rice (2005) for discussions of the responses by government officials in the USA and in New Zealand to warnings by medical professionals about the risks of troop transfers, to conditions in army camps (where infection and death rates were particularly high), to the need for public awareness and the risks of public parades in support of the war effort and in celebration of the armistice.
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