You may have seen that the government just increased the tax offset for most Australian full time workers by just over $500. Sure, you might say it’s a cynical attempt to buy votes just before an election. But it might be a clever way to put money back into Australian hands to get them spending.
It’s not as though the initiative is unfunded. We are apparently just one year away from reaching a budget surplus. Where has all of this extra money come from? One of the biggest contributors has been the Australian resources sector, led by BHP and Rio Tinto – which is why their share prices are getting closer to their all time highs.
According to stats released today, Australia just achieved a seasonally-adjusted record trade surplus of $4.8 billion in February 2019. Economists were only expecting a surplus of $3.7 billion.
Rising commodity prices could provide even more impetus for Australia’s financials.
It is amazing how BHP, Rio Tinto, Fortescue Metals Group Limited (ASX: FMG) and a few others can have such a large impact on whether Australia’s budget is in the black or not.
I can’t ever see myself investing in BHP, but I am benefiting from it with Treasurer Frydenberg offering to make Australians $500 better off largely because of the contributions of the resources sector.
The mining boom saved Australia during the GFC and a decade later it could be a key reason why Australia may avoid a recession again, or at least have a much softer landing.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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