These Are the Stocks to Watch When Australia Unveils Its Budget

(Bloomberg) --

Australian energy, infrastructure and health-care stocks will be in focus as the government unveils its budget on Tuesday, with policymakers set to deliver more firepower for the nation’s strong economic recovery.

The country’s stock benchmark closed at a record high on Monday amid a stronger-than-expected economic rebound that’s been driven by a commodities boom, Covid-19 controls and ample fiscal and monetary injections. Now, investors will be watching for additional support measures in light of Australia’s delayed vaccine rollout and ahead of the next federal election, which could be held between August and May 2022.

The budget is set to “influence confidence and conviction around Australia’s recovery path as well as corporate activity and the earnings outlook,” Morgan Stanley strategists led by Chris Nicol wrote in an April 29 note. “Incentives will be for the government to provide further stimulus measures in the budget, focused on infrastructure and business incentives.”

The S&P/ASX 200 Index closed 1.1% lower on Tuesday, falling alongside other Asia-Pacific benchmarks.

Issues to Watch:

Infrastructure:

• The government will earmark more than A$10 billion ($7.84 billion) for road and rail projects to support 30,000 jobs, according to Deputy Prime Minister Michael McCormack
• Key stocks to watch: Adbri, Lendlease, Bluescope, Boral

Government income support:

• Treasurer Josh Frydenberg is expected to extend income-tax breaks for low- and middle-income earners in a bid to keep them spending
• Key stocks to watch: JB Hi-Fi, Harvey Norman, Premier Investments, Metcash, Coles, Woolworths

Children and families:

• The budget will include a A$1.7 billion investment in childcare that will remove the current annual cap of A$10,560 per child on subsidies. It will also increase aid for families with two or more children, who will receive a maximum subsidy of 95% of childcare fees paid for their second and subsequent children
• Policies should increase occupancies across the childcare sector over time, RBC Capital Markets analysts led by Chami Ratnapala wrote in a May 3 note
• Key stocks to watch: G8 Education, Think Childcare
• NOTE: May 2, Australia’s Budget to Include A$1.7 Billion for Childcare

Housing:

• Frydenberg will announce a boost for first-home buyers trying to save for a deposit, including a new program set to benefit many women who are single parents
• The Family Home Guarantee will give eligible single-parent families access to a home loan with just a 2% deposit, according to Housing Minister Michael Sukkar
• Key stocks to watch: ANZ Bank, Commonwealth Bank, National Australia Bank, Westpac Bank, Bendigo & Adelaide Bank, Bank of Queensland, Stockland, Mirvac, James Hardie
• NOTE: May 8, Australia to Target Single Parents in New First-Home Buyer Plan

Aged care:

• Australia is considering an A$18 billion package to be delivered over four years, aimed at training aged-care workers and increasing funding for people with disabilities as well as mental health, The Australian newspaper reported
• Stocks to watch: Estia Health, Regis Healthcare, Japara Healthcare
• NOTE: May 9, Billions to Overhaul Aged-Care, Mental Health Systems: Australian

Digital economy:

• The government announced a A$1.2 billion investment strategy that would support digital skills and allow firms to quickly depreciate software
• Measures also include a digital-games tax offset for eligible businesses that spend a minimum of A$500,000 on qualifying Australian games expenditure
• Key stocks to watch: Emerge Gaming, Playside Studios, Esports Mogul
• NOTE: May 6, Australia Announces 30% Tax Offset for Video Game Developers

Energy and climate:

• The government will invest A$275.5 million to speed development of four hydrogen hubs in regional Australia and implement a clean hydrogen certification scheme
• Another A$263.7 million will support the development of carbon capture, use and storage hubs
• Key stocks to watch: Fortescue, Origin, Santos, Worley, Woodside
• NOTE: April 20, Australia to Fund Lower-Emissions Projects Ahead of Biden Summit

Agriculture:

• The government has pledged A$371 million in funding to strengthen the country’s biosecurity measures to protect against diseases and pests
• Key stocks to watch: Elders, Costa Group, Graincorp
• NOTE: May 4, Australia Boosts Funding to Protect Agriculture From Diseases

Health:

• Telehealth services for general practitioners, allied health providers and specialists will be extended to December, according to Health Minister Greg Hunt
• The government also announced a A$354 million women’s health package including funding for cervical and breast cancer, and reproductive health
• Key stocks to watch: Healius, Sonic Healthcare, Medibank, Nib
• NOTE: April 25, Telehealth Gets Extension After Cost Hits $2.8b So Far: AFR
  • May 9, Australian Treasurer to Address Women’s Safety, Health in Budget

Education:

• Private education colleges reliant on international students could see a A$53 million package to support local students, plus expand online and offshore course offerings amid border closures
• Key stocks to watch: IDP Education
• NOTE: April 30, Private Colleges Thrown Lifeline as Collapses Begin: AFR

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