Which ASX share may benefit from the jobs-led recovery Budget?

The Federal Budget will unleash record stimulus, with a focus on job creation. Here’s how ASX investors can benefit…

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Partisan politics continue to hamstring new stimulus measures in the United States. But here in Australia – with the real (inflation adjusted) rate of interest the government pays to borrow essentially zero – it looks likely that Labor will back the Federal Government’s massive new Budget proposal.

The Budget Treasurer Josh Frydenberg detailed last night will unleash record stimulus into the economy, with a focus on job creation. That spells good news for people currently unemployed as well as for Aussie workers on all levels of income. With stage 2 tax cuts brought forward and backdated to July, it means workers will be handing over less of their hard-earned money to the Australian Tax Office, leaving them more to spend and invest.

The Budget is even better news for most Aussie companies, as the Government leans on the business sector to help drive job growth and an economic recovery. A range of multi-billion-dollar business tax cuts and new spending packages should offer a welcome tailwind to many ASX share prices.

Here’s what Morgan Stanley has to say about it in the Australian Financial Review:

For financial markets, the highlight of the budget was the strong support given to business. Immediate capital write offs (in full) for businesses with less than $5 billion turnover on depreciable goods will remain in place until June 2022 (cost $27 billion) and be used in combination with tax loss carry-back.

Manufacturing, R&D incentives and energy also feature in business-friendly initiatives. This combined with previously announced deregulation of lending guidelines should allow for animal spirits to rise, and help the clear focus of a business-led recovery.

We’ll get back to those rising animal spirits, and one ASX share I believe investors should consider adding to their portfolio today, in a tick.

But first…

Trump’s trademark backflip

Like it or not, in today’s world politics has a greater influence on share markets than ever before.

To illustrate the point, the following two headlines come from the Sydney Morning Herald.

This one was published yesterday: ‘ASX set for more gains as Wall Street bounces higher on Trump, stimulus’.

And this headline was published this morning: ‘Wall Street dives as Trump orders halt to stimulus talks until after election’.

If you’re prone to motion sickness, you may want to reach for the Dramamine. With the last 3 years as a guide, President Donald Trump’s policy backflips have a penchant for repeating themselves.

Just this weekend, he urged Republicans and Democrats to bridge their differences and pass the next round of US stimulus spending, tweeting, “WORK TOGETHER AND GET IT DONE.”

Yesterday, he had a change of mind, tweeting, “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”

The Democrats are still pushing for a US$2.2 trillion (AU$3.1 trillion) spending package while the Republicans have drawn the line at US$1.6 trillion.

Now if you’re day-trading shares (which we don’t recommend), there are a lot of ways to make or lose money trying to guess when the US government finally opts to ‘work together and get it done’.

But if you’re a long-term investor you can simply keep your eyes on the calming horizon. Because whether it happens this week, next month or even further down the track, I’m happy to go out on a very sturdy limb here and say that the next round of massive US stimulus spending is inevitable.

And share markets will rally.

Back in the lucky country

While Australians have escaped the widespread coronavirus infections and high death tolls witnessed across much of the world, the measures taken to contain the virus have put many out of work.

The Government now expects unemployment to hit a high of 8% towards the end of 2020. That’s the highest it’s been since 1998 following the Asian financial crisis.

But last night Frydenberg made it clear that creating jobs was the Government’s top priority and core focus of the new Budget. He said:

There is great uncertainty, unprecedented uncertainty in the economic environment not just here in Australia but globally right now. What we have sought to do is create a series of incentives and make a series of investments that are designed to create more jobs. There is a record amount of spending but also important supply side structural reforms…

There is no economic recovery without a job’s recovery. There is no budget recovery without a job’s recovery. This budget is all about jobs.

Which brings us to one ASX share that should continue to benefit from the new jobs push, SEEK Limited (ASX: SEK).

The online job advertising giant, with a market cap of $7.8 billion, reports that job ads on its platform in the fortnight through to 27 September reached 80% of pre-COVID levels.

Victoria still lags with only 56% of the jobs listings the state had before the virus struck. But a number of states now have more job postings on SEEK than they did in February.

SEEK ANZ managing director Kendra Banks said:

South Australia and Western Australia have joined Tasmania and Northern Territory as having a higher number of jobs listed on seek.com.au than in February, surpassing pre-COVID levels…

As our recent data has shown when restrictions ease and economies stabilise this leads to an improvement in job ads.

As job ads increase, so too does SEEK’s core revenue base.

The SEEK share price fell more than 50% from 29 January’s record high through to the 23 March trough. Since that low it’s rebounded 86%. That leaves the share price down 7% from its all-time highs.

With the Government driving a job’s led recovery, and new listings already exceeding pre-pandemic levels in some states, I expect the SEEK share price will soon be back in record high territory.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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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