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These stocks find themselves unexpectedly swept up by the federal budget

A lot of the goodies in last night’s federal budget had been leaked to the public ahead of time but Federal Treasurer Scott Morrison had a number of surprises up his sleeve that will impact on a handful of ASX-listed stocks.

There are three sectors that investors weren’t expecting to be touched by the federal budget but we’ll start off with what we know.

Thanks to higher commodity prices and the accelerating global economy, the Turnbull government has a bigger than expected honeypot to sweeten up the electorate by spending big on roads and rail.

But it’s not only engineering and construction companies like Downer EDI Limited (ASX: DOW) and Cimic Group Ltd (ASX: CIM) that find themselves swept up by the budget.

The $530 tax relief for low- and middle-income families are also likely to give some retailers a reason to smile as these families are more likely to spend their tax “windfall” than save it.

This could mean added sales for the likes of Reject Shop Ltd (ASX: TRS), Ltd (ASX: KGN) and JB Hi-Fi Limited (ASX: JBH), although the impact will be marginal and households will have to wait for over a year to receive Scott Morrison’s cash gift.

The seven-year $140 billion tax reform package to create a flatter tax system will provide a more significant boost to retailers but we will have to wait years for that to happen and who knows who’ll be in Kirribilli House then.

What was a surprise is the cash injection to help the elderly stay in their homes for longer. The government is providing in-home support services for 14,000 elderly Australians.

This could translate into lower demand for residential aged care facilities, which is likely to negatively impact on Regis Healthcare Ltd (ASX: REG), Aveo Group (ASX: AOG) and Japara Healthcare Ltd (ASX:JHC).

The second group of stocks that have unexpectedly been affected by the budget is those who provide capital equipment to small and mid-size businesses as the government will allow an immediate write-down of equipment up to $20,000.

This could prompt these businesses to bring forward purchases of vehicles and accessories – something that will undoubtedly please Automotive Holdings Group Ltd (ASX: AHG), ARB Corporation Limited (ASX: ARB) and AMA Group Ltd (ASX: AMA).

Generic drug manufacturers like Mayne Pharma Group Ltd (ASX: MYX) could also find themselves benefiting from the budget as the government is pushing the use of generic drugs to save $336 million over the next five years.

The experts at the Motley Fool have also identified another group of stocks that are well placed to outperform the S&P/ASX 200 (Index:^AXJO) (ASX:XJO).

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Motley Fool contributor Brendon Lau owns shares of The Reject Shop Limited. The Motley Fool Australia has recommended ARB Limited, Automotive Holdings Group Limited, ltd, and The Reject Shop Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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