The Federal Treasurer Josh Frydenberg has handed down the federal budget and ASX investors should pay heed to the winners and losers as the budget could impact on your investment portfolio.
The details on federal government spending comes at a critical time for share investors as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index could struggle for direction after chalking up gains of around 10% since the start of 2019.
Australian shares need a catalyst to move higher after such a strong rally or they risk ceding ground quickly as investors could be tempted to lock in profits.
This is where the budget could make a difference and one of the biggest winners are companies linked to infrastructure construction as the federal government is boosting spending in this area to a record $100 billion over the forward estimates.
This could provide a stronger pipeline of work for engineering groups like Downer EDI Limited (ASX: DOW) and Cimic Group Ltd (ASX: CIM), while toll road operator Transurban Group (ASX: TCL) could also benefit from this thematic if private sector capital is required to fund part of the infrastructure building boom.
Retailers catering to everyday essentials and low-cost discretionary items could also see good share price support as the Morrison government announced $158 billion in tax relief for lower to middle income consumers.
Those earnings up to $126,000 a year will get a tax cut, which could be as much as $1,000 for individuals and up $2,160 a year for families on dual income.
The tax cut is to help households cope with rising cost of living pressures, and that means a good chunk is likely to flow to groceries – and that will probably put a smile on our supermarket giants Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL).
The government is also throwing extra money into medical by unfreezing the bulk billing rates for GPs and for medical scans. I don’t think it will make a significant difference to the likes of Sonic Healthcare Limited (ASX: SHL) or Healius Ltd (ASX: HLS) but it’s still a nice sentiment booster.
Fewer obvious losers
There aren’t really many losers per se from the budget as the budget is meant to be stimulatory. Most experts would agree that there are enough sweeteners to push the economy along without going overboard to threaten the projected budget surplus.
One group that may have drawn the short-straw are multinationals fighting the ATO, such as BHP Group Ltd (ASX: BHP). They could feel more pressure as the government is giving the tax office an extra $1 billion to investigate and prosecute cases where the ATO believes the company isn’t paying its fair share of tax.
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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Premier Investments Limited, and Woolworths Limited. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET, Premier Investments Limited, and Transurban Group. 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.