The investors' guide to Budget 2023

Canberra, we are back in the black (for now). 

For the first time since 2008, the Federal Budget has posted a surplus* of $4.2 billion. A combination of big tax receipts thanks to a fully employed economy and a boom in commodity export prices have created the perfect storm for the Albanese/Chalmers administration. But just because the national wallet is looking healthy doesn't rule out the challenges facing everyday Australians - far from it. 

Inflation is still at 7% on the headline level, and housing inflation continues to soar because of a rental crisis in our cities. Energy prices continue to remain lofty with gas prices up more than 20% in Melbourne in the last quarter alone. And perhaps most importantly, only 8 of the RBA's 11 interest rate hikes are priced into mortgage rates so far - and the central bank hasn't ruled out more. 

But as the Treasurer will know very well from his years working under Wayne Swan, surpluses don't last forever especially when its drivers are cyclical. 

So what's in the Budget for investors? 

In this wire, I will summarise the highlights as well as provide examples of companies that could benefit.

The all-important economic projections tables

And the economic projections from Treasury:

Reminder: The stocks mentioned in our list are just names and tickers of companies that could potentially benefit from the Budget. The Budget does not target specific companies by name. As with any piece on Livewire, this is all information and not advice. Please consult a professional financial adviser before making any investment decision.

The elephant in the room: Cost of living

• $14.6 billion in total spending, sold as cost-of-living support to last the next four years.
• 5 million households to receive $500 off their power bills.

Taxes and repaying the COVID-19 debt

• No changes are expected to the stage three personal income tax cuts.
• Interest payments should drop by around $6 billion over the four years to the end of 2025-26 (the lower repayments are simply down to the yield on the Australian 10-year bond).
  
• The Petroleum Resources Rent Tax will be increased, estimated to bring in an extra $600 million a year for the next four years.

Potential companies affected: AGL (ASX: AGL), Beach Energy (ASX: BPT), Origin Energy (ASX: ORG), Santos (ASX: STO), Woodside Energy (ASX: WDS)

Superannuation

• Labor will tax earnings from superannuation balances over $3 million at 30% starting in 2025.
• Businesses will be required to pay workers their superannuation contributions every payday beginning July 2026.

Health, childcare, and the NDIS

• $2.2 billion package designed to fix primary healthcare services, including Medicare and hospitals reform.
• The cost of delivering aged care will rise 23%, mostly from pay rises for aged care workers.
• Extra $2.2 billion for the Pharmaceutical Benefits Scheme.
• Childcare subsidy expenses will increase by $1.4 billion this coming financial year.
  
• The National Disability Insurance Scheme’s growth rate will be cut to 8% by July 2026 from the current 13.8%. 

Potential companies affected: Ramsay Health Care (ASX: RHC), Regis Healthcare (ASX: REG), Estia Health (ASX: EHE), G8 Education (ASX: GEM), Mayfield Childcare (ASX: MFD), Arena REIT (ASX: ARF).

Note: There are no major listed companies that operate in the disability space. 

Infrastructure and housing

• Another $2 billion has been allocated for more social and affordable housing.
• Commonwealth rent assistance to go up by 15%.
• 1 million new homes from 2024 to 2029, driven by tax breaks for build-to-rent projects.
• But... hundreds of other infrastructure projects may be on the chopping block due to a Labor audit already underway.

Potential companies affected: James Hardie (ASX: JHX), Boral (ASX: BLD), CSR (ASX: CSR), AdBri (ASX: ABC), Mirvac (ASX: MGR), Stockland (ASX: SGP)

Megatrends (renewables and AI)

• $2 billion for a "Hydrogen Headstart" program.
• A new "capacity investment scheme" to "unlock over $10 billion of investment in firmed‑up renewable energy projects".
• $101 million to "support the growth of critical technologies", including AI and quantum technologies.

Potential companies affected: Hazer Group (ASX: HZR), Frontier Energy (ASX: FHE), Pure Hydrogen (ASX: PH2), Fortescue Metals Group (ASX: FMG) through FFI, Appen (ASX: APX)

Defence

• More than 30 defence projects will be either scaled back, delayed or scrapped in a bid to reposition our armed forces.
• But... $1.9 billion allocated to "strengthening our relationships in the Pacific."

Potential companies affected: Austal (ASX: ASB), Droneshield (ASX: DRO), XTEK (ASX: XTE)

*The surplus is estimated, given the actual Budget figures won't be finalised until September which is long after the financial year ends.