S&P/ASX 200 Index (ASX: XJO) retail shares stand to be among the big beneficiaries of the new Federal budget, according to one fund manager.
The budget, unveiled last week, is widely seen as offering something to almost everyone… except for Australia's future taxpayers.
Indeed, the government is opening the spending taps wide. So wide, that AMP Capital's chief economist, Shane Oliver, estimates total government spending (spent and projected) since the early days of the COVID-19 outbreak has now hit around $350 billion. (More budget coverage here.)
Commenting on the Federal budget, Ophir Asset Management senior portfolio manager Andrew Mitchell said (quoted by the Australian Financial Review):
It was certainly a spendathon, and the Frydenberg treasury will likely go down as one of the biggest spenders in history. This perhaps shouldn't be surprising as they have an election to win and an economy that still needs to play catch-up due to COVID-19.
Mitchell said he was caught off-guard by the government's decision to extend the $7.8 billion low and middle-income tax offset for an extra year. Some 10 million taxpayers are eligible for the end-of-year rebate of up to $1,080.
He added, "The boost to household consumption…should see retailers remain strong."
Two of the ASX 200 retail shares Mitchell singled out that should benefit are Harvey Norman Holdings Ltd (ASX: HVN) and JB Hi-Fi Ltd (ASX: JBH).
Image source: Getty Images
Cashed up consumers
It's not just the latest extension of tax cuts that look set to offer another tailwind for ASX 200 retail shares.
Australian consumers also remain cashed up on the back of temporary boosts to JobSeeker and the recently terminated JobKeeper program. And with domestic borders only now fully reopening and international travel restrictions remaining in place, many consumers haven't been spending as much as they would have in 'normal' times.
Which brings us back to…
Two ASX 200 retail shares tipped to benefit
Over the past full-year, JB Hi-Fi has handily outperformed the benchmark. Shares in the consumer electronics retailer are up 43% in 12 months. By comparison, the ASX 200 gained 29% in that same time. Year-to-date the JB Hi-Fi share price has gone the other direction, slipping 2% so far in 2021.
At the current price of $48.74 per share (up 3% in intraday trading today), JB Hi-Fi has a market cap of $5.6 billion. The ASX 200 retail share pays a dividend yield of 5.54%, fully franked.
Harvey Norman's share price is also marching higher today.
Shares in the discretionary retailer are up 2% in intraday trading giving shareholders an 86% gain over the past 12 months. Harvey Norman is beating the benchmark in 2021 as well, with shares up 11% in 2021.
At the current price of $5.29 per share, Harvey Norman has a market cap of $6.6 billion and pays a dividend yield of 7.20%, fully franked.
