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Australian Shareholder Winners and Losers from May’s Budget

Written by Ellie Parkinson

The first federal budget since the narrow re-election of the Liberal/National coalition in 2016 was announced on the evening of Tuesday 9th May. There were a couple of surprise inclusions in the budget, with plenty of winners and losers, from good news for patients and farmers, to bad news for university students and foreigners. Shareholders and those looking to start online share trading will be affected by the budget’s reveal too, though many changes had already been priced in. 

The Big Banks

Australia’s big four banks came off the worst from the budget, set to be hit by a new levy that will raise $6.2bn over four years. Only institutions with licensed entity liabilities of at least $100bn will be affected, meaning just the big four banks of ANZ, Westpac, NAB and Commonwealth will have to pay between $3-400m each year.

This was the most surprising announcement, though there were rumours beforehand which saw the share prices of all four big banks fall in anticipation of the budget. Since the start of the week Australia’s major banks lost a combined $14bn in market value, almost 10%. However, they have since started to bounce back and were trading at around 13.5 times their 12-month forward earnings, closer to the ten-year mean of 13 times.

With bank investors and shareholders set to help cover the new levy, their share prices may take longer to fully recover. Especially if fees are increased and customers and shareholders look to other regional or smaller banks.   

Businesses Relying on Foreign Workers

Large businesses which rely on foreign workers can also expect to pay new levies for foreign workers which aim to raise $1.2bn over four years. Any company with a turnover of more than $10m will be required to pay $5,000 upfront for every foreign employee on a permanent work visa, $1,800 for those on a temporary one.

Smaller firms will be hit too, having to pay $3,000 for those on a permanent visa and $1,200 on a temporary. It will be the huge, foreign-owned companies that will be hit hardest though, and could expect to see their share prices drop in retaliation to the news. For the most part though, this levy is not as severe as that on banks, so little is expected to change based purely on the budget announcement.  

Construction and Transport

Construction firms could be in for a boom as $75bn was announced to be pumped into infrastructure. The Australian Rail Track Corporation is set to build an $8.4bn project to link Melbourne and Brisbane, creating 16,000 jobs. $5.3bn in equity is also being allocated for the western Sydney airport, with the equity going to the WSA company, so both these companies could see their stock rise in the coming years.

Access to gas resources and new energy infrastructure in south Australia are also covered, with $3bn previously pledged to support new emissions technologies. This includes money to establish mobile and internet connectivity on Hornsby to Wyong train routes, so expect certain internet providers to receive a price boost for whoever gets the contract.

Technology Start-ups and Astronomy

An outlay of $74m was announced to increase Australian innovation in its manufacturing sector. These funds will presumably be accessible for start-ups in the technology sector to introduce new products and technologies, increasing the competitiveness and investment of such firms, and thus raising their share prices. Finding, monitoring and investing in such a company could be a good idea to receive good returns.

The astronomy sector was also a winner, with $19m devoted to support a partnership with the European Southern Observatory. Expect interest in astronomy company shares to pick up as well.

There were various winners and losers from the Australian federal budget, the next few months and years will tell how well the losers recover and the winners prosper from the new funding measures.    

The first federal budget since the narrow re-election of the Liberal/National coalition in 2016 was announced on the evening of Tuesday 9th May. There were a couple of surprise inclusions in the budget, with plenty of winners and losers, from good news for patients and farmers, to bad news for university students and foreigners. Shareholders and those looking to start online share trading will be affected by the budget’s reveal too, though many changes had already been priced in. 

The Big Banks

Australia’s big four banks came off the worst from the budget, set to be hit by a new levy that will raise $6.2bn over four years. Only institutions with licensed entity liabilities of at least $100bn will be affected, meaning just the big four banks of ANZ, Westpac, NAB and Commonwealth will have to pay between $3-400m each year.

This was the most surprising announcement, though there were rumours beforehand which saw the share prices of all four big banks fall in anticipation of the budget. Since the start of the week Australia’s major banks lost a combined $14bn in market value, almost 10%. However, they have since started to bounce back and were trading at around 13.5 times their 12-month forward earnings, closer to the ten-year mean of 13 times.

With bank investors and shareholders set to help cover the new levy, their share prices may take longer to fully recover. Especially if fees are increased and customers and shareholders look to other regional or smaller banks.   

Businesses Relying on Foreign Workers

Large businesses which rely on foreign workers can also expect to pay new levies for foreign workers which aim to raise $1.2bn over four years. Any company with a turnover of more than $10m will be required to pay $5,000 upfront for every foreign employee on a permanent work visa, $1,800 for those on a temporary one.

Smaller firms will be hit too, having to pay $3,000 for those on a permanent visa and $1,200 on a temporary. It will be the huge, foreign-owned companies that will be hit hardest though, and could expect to see their share prices drop in retaliation to the news. For the most part though, this levy is not as severe as that on banks, so little is expected to change based purely on the budget announcement.  

Construction and Transport

Construction firms could be in for a boom as $75bn was announced to be pumped into infrastructure. The Australian Rail Track Corporation is set to build an $8.4bn project to link Melbourne and Brisbane, creating 16,000 jobs. $5.3bn in equity is also being allocated for the western Sydney airport, with the equity going to the WSA company, so both these companies could see their stock rise in the coming years.

Access to gas resources and new energy infrastructure in south Australia are also covered, with $3bn previously pledged to support new emissions technologies. This includes money to establish mobile and internet connectivity on Hornsby to Wyong train routes, so expect certain internet providers to receive a price boost for whoever gets the contract.

Technology Start-ups and Astronomy

An outlay of $74m was announced to increase Australian innovation in its manufacturing sector. These funds will presumably be accessible for start-ups in the technology sector to introduce new products and technologies, increasing the competitiveness and investment of such firms, and thus raising their share prices. Finding, monitoring and investing in such a company could be a good idea to receive good returns.

The astronomy sector was also a winner, with $19m devoted to support a partnership with the European Southern Observatory. Expect interest in astronomy company shares to pick up as well.

There were various winners and losers from the Australian federal budget, the next few months and years will tell how well the losers recover and the winners prosper from the new funding measures.    

 

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