ASX retail stocks set to reap $8 billion boost within months

Consumer facing stocks are among the top performers on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index today as the sector will get a double tailwind from the re-elected Coalition government.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Consumer facing stocks are among the top performers on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index today on hopes that the tax cuts promised by the re-elected Coalition government would give the sector a much needed boost.

The JB Hi-Fi Limited (ASX: JBH) share price surged 5.2% to $26.90 in after lunch trade, while the Super Retail Group Ltd (ASX: SUL) share price jumped 4.5% to $8.54, Harvey Norman Holdings Limited (ASX: HVN) share price increased 3.8% to $3.98 and Woolworths Group Ltd (ASX: WOW) share price added 1.6% to $34.74.

While federal Labor had also promised tax cuts for middle to lower income households, it would have increased taxes for wealthier Australians and removed tax benefits for many investors.

Why Liberals are better for retail

Having a Coalition government is clearly more stimulatory for our economy and that's probably explains in the simplest terms Labor's shock defeat at the polls on the weekend.

The bigger tax refunds will come as soon as most taxpayers file their FY19 tax returns and it's estimated to provide a stunning $8 billion boost to household's coffers, according to the Australian Financial Review.

But there's a double tailwind to retailers from the election. Federal Labor under Bill Shorten would have lifted the minimum wage and retail outlets would be hit the hardest along with hospitality businesses.

A Shorten government would have lifted holiday penalty rates and increased the minimum wage by pegging it to a "living wage", prompting Wesfarmers Ltd's (ASX: WES) chairman Michael Chaney to warn of definite job losses.

Tax cuts to lift consumer spending

Citigroup estimated that the tax relief would boost retail spending by 1% to 1.5% in the September quarter, reported the AFR.

The Liberal-National Coalition's will see middle to lower income taxpayers get up to $1,080 a year, and this doubles for couples. It's estimated that nearly five million Aussies will qualify for the full tax rebate.

The Morrison government doesn't want to stop there. It also wants to cut taxes for higher income earners and flatten the tax regime by removing one of the tax brackets, although that won't happen for some years – and provided nothing untoward happens to the Australian economy.

Getting the budget back into surplus is a bigger priority and the Coalition is promising that will happen by this year. The strong iron ore price, which is climbing towards US100 a tonne will go a long way to helping the federal government reach this goal and ScoMo will be keeping his fingers crossed that commodity prices can hold on to recent gains.

Iron ore is our biggest export and the price of the steel making ingredient has surged 44% over the past year to US$96.34 a tonne.

But it isn't only retailers and iron ore miners that have a brighter outlook. The experts at the Motley Fool also believe this other sector will run hot in 2019, if not beyond.

Follow the free link below to find out more.

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of Super Retail Group 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.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »