MENU

Federal Budget leaves consumers wary

Surveys have shown that consumers are feeling a little pessimistic following last week’s budget. Many consumers are already planning to cut their levels of spending, after 63% of respondents told financial products website Mozo that the budget would leave them worse off, according to The Sydney Morning Herald.

Upon last week’s release of the federal budget – which forecast an $18 billion deficit for the 2013-14 year – one of the key changes made was to the Medicare levy, which will be increased by 0.5 percentage points to fund disability care. Meanwhile, the baby bonus that has provided new parents with $5,000 in the past will be scrapped as of March next year.

Over the years, the baby bonus has often been used to purchase new television sets or other various electrical goods. As such, the removal of the bonus will likely affect retailers including JB Hi-Fi (ASX: JBH) and Harvey Norman  (ASX: HVN) – both of which are already enduring difficult conditions in the electrical goods sector. Furthermore, 55% of participants in Mozo’s survey have expressed concerns that they would be $300 worse off per year – further impacting any intentions to spend.

After downgrading its full-year profit guidance to be $13.5 billion to $15.5 billion, Fantastic Holdings (ASX: FAN) – the owner of brands such as Fantastic Furniture and Dare Gallery – may also face further difficult times ahead. Despite interest rates being cut to a record low of 2.75%, the retail environment remains uncertain, and as consumers face the reality of having less disposable income, confidence to spend will decrease.

Further results showed that consumers are also concerned about the 15% tax being introduced on superannuation earnings of more than $100,000 annually as of July next year, whilst only 2% of consumers were concerned about a tax hike on cigarettes.

Foolish takeaway

The budget has left many consumers feeling uneasy about their savings and, as such, will result in many becoming more selective about how they spend their money. This comes as another blow for retailers, who are still recovering their profit margins.

In the market for high yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading:

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.