Shares in JB Hi Fi and Harvey Norman have both jumped higher today following the announcement of a massive ‘Buy a Vote” budget from the Federal Labor Government, days out from an election being announced.
Subsidies and tax cuts announced in the federal budget are tipped to drive consumer spending, with the retail sector an early beneficiary especially in product categories such as smartphones headphones and wellness.
Analysts are tipping that the Reserve Bank is unlikely to deliver a second consecutive rate cut next week despite a decline in inflation which is also helping to lift sales at CE and appliance retailers.
The consumer price index slowed to 2.4% in February from a year earlier, according to the Australian Bureau of Statistics, this was down from 2.5% in January.
According to AMP’s head of investment strategy and chief economist, Shane Oliver retailers could be the big winner.
The budget outlined $17.1bn in additional tax cuts over the next four years, cutting the 16% per cent tax rate to 14%.
“The budget is positive for spending and hence retail shares, but this may be offset by higher than otherwise rates,” he said. “Some manufacturers may benefit from subsidies.
Cost-of-living measures will keep headline inflation down, but the RBA will focus on underlying inflation and “here the ongoing rise in government spending is making its job harder,” he told the Australian.
In terms of stocks that could benefit from stronger consumer demand, electronics retailer JB Hi-Fi rose as much as 1.9% early Wednesday, the possibility of further rises as investors look at the flow on effect of the latest budget.
Budget spending initiatives included cost-of-living relief with a $1.8bn extension of electricity rebates.
Wilsons Advisory head of investment strategy, David Cassidy, said the “spending spree” by the government has been masked by a significant revenue boom from soaring personal income tax payments and taxes on corporate profits due largely to resilient prices for iron ore, coal and gas.
The Government is also benefitting from additional taxes follow salary increases due to inflation.
Citi retail and gaming analyst Adrian Lemme said the new measures in the budget should provide a $3.7bn boost to household disposable income in the 2026 financial year, but the new income tax cuts won’t take effect until FY27 with the full benefit not received by taxpayers until FY28.
“Overall fiscal policy will have a broadly neutral impact on households over FY26-FY28,” he said
According to Macquarie Equities, the newly announced budget measures will “provide modest additional stimulus relative to the previous budget update in December” but they were “largely as expected and are not material enough to change our view on the economy.”.
The Australian Retailers Association (ARA) and National Retail Association (NRA) said the Federal Government’s modest cost of living measures in today’s federal budget, including delayed tax cuts, energy, health care, student debt relief and pensioner measures, may have a flow-on effect to consumer confidence.
However, the sector cautioned that the slow-down in spending coupled with rising business costs leaves retail businesses extremely vulnerable.
The ARA and NRA said an absence of support for business and productivity growth is a significant missed opportunity in this Budget.
ARA Chief Industry Affairs Officer Fleur Brown said the budget focus on hip pocket relief across a range of programs may help bolster confidence, but it’s unlikely to deliver the support struggling retailers have been crying out for.
“It’s been five years of economic uncertainty for Australian retailers who are still weathering the consumer spending slowdown coupled with ongoing and rising costs of doing business.
More focused support is needed to ensure vulnerable businesses and small businesses in particular can survive and grow.
“Small business owners have been in the trenches, fighting to survive. It’s disappointing there seems to be more funding in this budget to enhance red tape and regulation compliance than to educate or relieve businesses of that administrative burden. We are disappointed to have uncertainty around the instant asset write-off, which is not accounted for in the budget.”
National Retail Association (NRA) Interim CEO Lindsay Carroll said as Australia’s largest private sector employer, the retail industry requires continued government support to maintain economic stability and protect jobs.
As the country heads into the election period, the ARA and NRA will actively engage with policymakers to ensure retail interests remain at the forefront of the political agenda.
“Employing one in ten Australians and contributing around 18 percent to GDP, retail is the backbone of many communities, and strong government policy is crucial to ensuring its long-term success,” Ms Carroll said.
“As we build towards the Federal Election, the ARA and NRA are focused on helping to drive innovation, resilience, and job growth for the $430 billion sector,” she said.
