Australia budget expected to rock stocks from housing to mining

Mining, infrastructure, and childcare shares are among just a handful of stock winners expected to be unveiled within Australia’s budget Tuesday, as the new Labor government aims to focus on fiscal credibility amid tighter monetary policy and soaring inflation.

The financial blueprint, Prime Minister Anthony Albanese’s first since winning May’s federal election, will emphasize campaign pledges and trim spending where possible, the government has said. While the country’s benchmark S&P/ASX 200 Index is down 8.9% this year, it’s less than one-third of the losses on the MSCI Asia Pacific Index.

“We expect limited new announcements -- largely a reconciliation of election promises, stronger budget position, and weaker economic outlook,” Morgan Stanley analysts led by Chris Nicol wrote in an Oct. 19 note. “The next budget in May is more likely to be policy-heavy, but this will still depend on the trajectory of inflation and the broader economy.”

Here are the key focal points to watch: 

Infrastructure

• The government will pledge A$9.6 billion ($6 billion) for road and rail work, the Australian Associated Press reported
• Funding for a commuter car park in Sydney and some Melbourne projects will be scrapped, according to the Australia Broadcasting Corp.
• Key stocks to watch: Boral Ltd., Adbri Ltd., Lendlease Corp., and Bluescope Steel Ltd.
• Read: Australian Budget Will Include A$9.6 Billion for Infrastructure

Resources

• The budget will include A$50.5 million over four years to establish a critical minerals research and development hub, according to the West Australian
• A$1 billion will be allocated to support value-adding resources projects and A$50 million will go to grants for early- and mid-stage critical minerals projects, the newspaper reported
• Key stocks to watch: Allkem Ltd., Iluka Resources Ltd., Arafura Resources Ltd.

Housing

• The budget may include supply-side policies on real estate given the tight rental market, Morgan Stanley said
• Key stocks to watch: Property-listing firms REA Group, Domain Holdings Australia Ltd.; lenders Commonwealth Bank of Australia, Australia & New Zealand Banking Group, National Australia Bank Ltd., Westpac Banking Corp.
• Read: Australian House Prices Drop as Steep RBA Rate Hikes Sour Demand

Children and Families

• A range of family-focused measures such as additional childcare funding will be featured
• The government said it will increase paid parental leave to 26 weeks from 18 weeks
• Key stocks to watch: Childcare provider G8 Education Ltd.; educational services firm 3P Learning Ltd.
• Read: Australia to Extend Paid Parental Leave to Six Months From 2024

Telecom

• The government will expand full-fiber access to 1.5 million premises by 2025 with a A$2.4 billion equity investment in the National Broadband Network over four years, according to Communications Minister Michelle Rowland
• Key stocks to watch: Telstra Corp., TPG Telecom Ltd., Aussie Broadband Ltd.