INTHEBLACK October 2021 - Magazine - Page 54
F E AT U R E
// E C O N O M I C R E C O V E RY
WE NEED A
TRICKLE-UP
APPROACH
BUILD
WEALTH
INDEPENDENTLY
JACOB ALDRIDGE
I N T E R N AT I O N A L B U S I N E S S
ADVISER
A
typical recession usually starts with
a specific industry and slowly affects
tertiary services like hospitality and tourism.
The pandemic trigger for the COVID-19
recession has meant that, for the first time
in history, hospitality and tourism were
impacted first, and these industries
typically employ younger and lowerskilled individuals.
In response, governments in the developed
world pumped billions of dollars into fiscal
stimulus packages, which had the desired
effect of keeping people employed, but
the broad and indiscriminate nature of
the stimulus pushed a lot of extra money
into the hands of those who didn’t need
more cash.
Furthermore, the lingering impact of
inflation will benefit those who have
significant assets that increase in value,
moderate levels of debt, and secure income
to respond to any interest rate rises.
Australia will never offer equality of
outcome with regards to financial security,
because some people are better at creating
value, some are better at managing wealth,
and others just get lucky. As a country
54 ITB October 2021
JEREMY BRITTON
though, we can do more to support equality
of opportunity.
Just as our health system provides a safety
net, we can provide a stronger income safety
net as well. Reliable and stable cash flow
support for our lowest earners will not make
them wealthy, since they have little choice
but to spend it on essentials. However, since
one person’s spending is another person’s
income, the trickle-up effect of reliable
income support at the bottom end of the
economy means more money will flow
through our businesses and be taxed along
the way.
We can now say with confidence, after
40 years of testing, that trickle-down
economics doesn’t work. My experience
with business owners around Australia and
internationally is that most appreciate tax
cuts, but all are looking for more customers.
Meaningful increases to the financial
safety net of our pensioners, underemployed
or Australians otherwise unable to work will
reverse the decline they are experiencing in
the K-shaped recovery, while also providing
positive financial outcomes to business
owners and their staff.
U S - B AS E D F I N A N C I A L
ADVISER AND ECONOMIST
I
t may be an unpopular opinion to state
that the so-called “economic recovery”
is all smoke and mirrors, or that it favours
the rich over the poor, but that is my
belief system.
Since the start of the pandemic,
governments and central banks have
collaborated to print more cash than they
did for the bailout of the 2008 global
financial crisis. Anyone with a modicum
of common sense will realise that printing
30 per cent more cash than was in existence
in 2019 will lead to inflation.
The cost of groceries, healthcare, insurance
and most shipped products will continue
to rise. Meanwhile, wage growth is largely
static at the lower end, and interest rates on
cash are close to zero.
Anyone who is paid or holds their
savings in cash in the bank is actually
going backwards. Those who rely on
the benevolence of governments and
central banks may face a bleak future via