Treasurer Josh Frydenbeg's first federal Budget was slightly unusual.
No, not for its content, but because it is more 'election promise' than traditional Budget. Given there's no more time for parliament to sit before the election, the government's intentions will only be given the full force of law if it wins (and if the crossbenchers are kind).
The Opposition's response tonight will be somewhat the same — the economic battle lines that will, in part, determine how the nation votes in May.
Investors, then, need to consider not only the policies announced, but the chances of those policies — from both sides — becoming law.
In a normal year, it's fair to assume the Budget will, at least in large part, become law. Given where we are in 2019 — with both the opinion polls and the betting markets suggesting the Morrison government has an uphill climb — it would be a brave investor who altered course purely on the basis of the Treasurer's speech (and the reams of paper that comprise the Budget proper).
But let's turn our attention to what's in front of us. Both because the government may be reelected, and also because the Opposition may adopt some of the budget measures, for policy or political reasons.
Unlike in some previous years, there's not a lot of direct impact for investors. No changes to superannuation, capital gains taxes, dividend taxation or negative gearing. Instead, we turn our attention to the companies that stand to gain from the document.
I'd normally say 'gain and lose', but as an election document, there are few, if any, losers.
The first thing that stands out is the nice, big, round $100 billion being committed to infrastructure spending. Yes, as in the way of these things, the length of time over which the money is being spent is getting longer, but the government has clearly set its sights on building things.
Trains, mostly, with Treasurer Frydenberg highlighting rail lines across much of regional Victoria and NSW, in particular. That'd be great news for building and infrastructure businesses, and the companies that provide them with everything from software to shovels.
The second area is the continuation and expansion of the small business instant asset tax write off, that allows the cost of a newly acquired asset to be expensed instantly (rather than depreciated) for tax purposes.
Not only is the threshold for the asset value planned to go from $25,000 to $30,000, but businesses with a turnover of up to $50 million could now benefit (up from $10 million).
That's good news for the small businesses themselves, but also for their suppliers — the likes of Harvey Norman, Officeworks and a plethora of other office equipment retailers should gain from the move. In addition, the extra $5,000 will bring more vehicles under the cap, making it a potential boon for retailers of cars, utes and vans.
Lastly, the proposed increase in the low-income tax offset should benefit the whole economy, with lower-wage workers far more likely to almost immediately spend the extra money than their higher earning brethren.
That's more money going into the economy, which should stimulate activity across the board.
Foolish takeaway
This is a pre-election Budget.
The government is, short of a change in political fortunes, unlikely to get the opportunity to propose it as legislation. And of course, there are more reasons to vote for a political party — or their opponents — than just the budget.
Still, should circumstances favour the incumbents, small business as well as shareholders in car retailers, small business suppliers and infrastructure companies stand to benefit.
