Which sectors will benefit from Rudd’s $10.4 billion stimulus package?

The Rudd Government’s great Christmas cash handout program is designed to prevent the Australia economy from sliding into recession in the next six to 12 months, or at least cushioning the blow if it does.

The stimulus package is aimed mainly at low and middle income earners, and includes five main planks:

$4.8 billion in new support for pensioners and carers, to be paid in the form of lump sums later this year.
$3.9 billion for low and middle income earners. Many families will receive a $1000 payment per child.
$1.5 billion for first home buyers, with the first home buyer bonus to be doubled from $7000 to $14,000 on established homes and tripled to $21,000 for new homes.
$187 million to double the number of training places available to 113,000.
Fast-tracking of the Government’s $20 billion infrastructure program.

So which sectors of the economy are going to benefit most from this spending spree?

Retail

The package is designed to stimulate economic growth by boosting consumer spending, so retailers stand to benefit most of all, as pensioners, carers and families will all have around $1000 more in their wallets. The fact that most payments will be made around 8 December should mean the Christmas trading period will be a lot better than earlier thought.

The executive director of the Australian Retailers Association, Richard Evans, is clearly thrilled by the package, but says it’s too early to predict retail trade this Christmas. The group had expected Chritmas retail trade growth rate to fall from 7.6% last year to around 4.5%, which would equate to retail sales of approximately $36.9 billion this year, compared to $35.4 billion in 2007.

“However last week’s interest rate cut of 1% and now Prime Minister Kevin Rudd’s plans to give consumers an early Christmas present means we will have to re-evaluate these figures,” Evans says.

Property

The Government’s support for the property sector has thrilled the Housing Industry Association, with managing director Ron Silberberg predicting a big jump in construction activity and an improvement in housing affordability.

When the first home owner’s grant was doubled for new house purchases in 2001, the number of new dwellings built increased by 3000 per month over a nine month period. This time around, HIA is tipping new housings starts will jump by 15,000.

A wide range of property services and construction businesses will benefit from the initiative, including real estates agents, builders and other trades, home maintenance companies and even legal businesses involved in conveyancing.

Training and education

Doubling the number of places in the Government’s Productivity Places program to 113,000 should provide a big boost to Australia’s registered training organisations (RTOs). Jim Barron, chief executive of peak body Group Training Australia, described the $187 million package as a sensible measure for a slowing economy. “The injection of funds into skills development and training will have an expansionary impact on the economy while quickening the pace of re-skilling in critical areas of labour shortage.”

The package will also allow RTOs to expand into a new category of training called structural adjustment training. This is designed to assist recently unemployed workers get back into the workforce and, unfortunately, this type of training could be an expanding area of business for RTOs over the next period.

Engineering and construction

The Rudd Government is determined to fast-track its $20 billion infrastructure program, which will keep the already-stretched engineering and construction sector running at full speed. The challenge for this sector is likely to be finding the skilled labour necessary to complete projects, although job cuts in other sectors could provide new workers.

Tourism and leisure

Australia’s beleaguered tourism industry could also be a beneficiary of the cash handouts – what doesn’t get spent on Christmas presents could well get spent on a quick family holiday over the summer months. The falling Australian dollar could also help the sector, as international tourists cash in and Australian tourists stay at home.