In light of Labor’s “solid and sensible” federal budget handed down on Tuesday, economists have laid out some of the potential implications for Australian assets.
In its analysis of the 2022 budget, CommSec said targeted government spending would primarily benefit mining, housing, climate, infrastructure and child care-related shares.
Breaking down the impacts of the budget on sharemarket investors, CommSec’s senior economist, Ryan Felsman explained that the $25 billion in climate-related spending announced by the government could benefit ASX-listed lithium, rare earths and battery-focused companies, such as Pilbara Minerals, Lynas Rare Earths and Iluka Resources.
Moving on to the infrastructure sector, Mr Felsman said the $8.1 billion infrastructure spend could bring building materials, residential and commercial property developers into focus, including companies like Transurban, Adbri, BlueScope Steel, Boral, Brickworks, CIMIC, James Hardie, Mirvac and Stockland.
These companies, along with the banks and property-listing firms REA Group and Domain, are also expected to benefit from the government's new initiatives to address housing affordability.
Household spending and population growth items are expected to favour consumer discretionary and consumer staples stocks, which, Mr Felsman said, include supermarkets and electronics retailers, such as JB Hi-Fi, Harvey Norman, Premier Investments, Metcash, Coles, Wesfarmers and Woolworths.
Moreover, according to the economist, the $4.6 billion allocated towards providing more affordable childcare, could benefit companies like G8 Education and 3P Learning, while health care providers such as Healius, Monash IVF, Sonic Healthcare and Virtus Health, along with biotechnology companies CSL, Imugene and Telix Pharmaceuticals, could prosper from the health care orientated spending.
Additionally, spending on aged care could help lift the shares of Estia, Regis and Japara.
Other budget beneficiaries
In his budget analysis, AMP’s chief economist, Dr Shane Oliver, offered an overview of the beneficiaries, noting that “there are more losers” than in the March budget, including foreign investors.
Casting a light on Australian bonds, Dr Oliver said the ongoing budget deficit, which is projected to get worse beyond 2024–25, would add to upwards pressure on bond yields.
While announcing lower budget deficits this year and next, Treasurer Jim Chalmers said future years show a significant deterioration as structural spending pressures, higher interest rates and lower productivity growth impact.
But while the deficit picture painted by the budget is bleak, Dr Oliver explained that given bond yields have been lowered in the near term, “there should be no new upwards pressure on bond yields from this source.”
“[In the] longer term, the budget deficits present more of a challenge though,” he warned.
Turning to property, Dr Oliver said: “The confirmation of more home buyer schemes and more immigrants offset by long-term housing supply measures are unlikely to alter the dominant negative impact of rising mortgage rates in driving a cyclical downturn in home prices”.
Earlier this month, CoreLogic reported that house prices across the country are down by almost 5 per cent from their peak earlier this year.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.