The Rudd Government is confident its $42 billion stimulus package can give the economy and the business sector a big boost. But it is clear that some sectors stand to benefit much more than others.
Is your sector one of the winners?
Advertising and marketing
There’s not a lot in this package for the advertising and marketing sector, although retailers are likely to use the cash handouts contained in the package as a springboard for promotions, which should provide some help for this struggling sector.
Agribusiness
The stimulus package contains $20.4 million in payments for farmers already receiving drought assistance, which should help stimulate growth in the short term.
Construction and engineering
This sector is one of the clear winners, with over $21 billion being poured into school buildings and public housing. Big construction companies such as Leighton Holdings and Queensland’s BMD Group (owned by wealthy entrepreneur Mick Power) will benefit, as will the thousands of small construction firms around the country that have been struggling in recent months.
The one potential hurdle is the speed at which the money will flow, given planning processes often take months to negotiate.
Food and beverages
There’s nothing specific for this sector, but as Coca-Cola Amatil chief executive Terry Davis said this morning, increased economic activity creates thirsty workers. “We would expect to benefit from the employment creating in infrastructure,” David told The Australian Financial Review. “More construction equals more consumption of beverages.”
Financial services and insurance
Another sector that will be hoping for a general lift in economic activity helps boost demand for its products and services, but conditions are likely to remain very difficult.
Health and pharmaceuticals
There’s nothing specific for this sector, although the ageing population should insulate it from the worst of the recession.
Information technology
Conditions in the IT sector remain difficult, although the Government’s additional 30% tax deduction for eligible assets should help drag forward some spending on IT hardware. This could help large companies such as HP and Dell as well as smaller computer firms.
Internet
Nothing specific for this sector. Amazingly, the big ticket infrastructure spending contained nothing extra for the Government’s broadband network plans.
Leisure and gaming
Research showed gambling spending increased following the last Government handout in December, and this even bigger handout is likely to have the same effect. But conditions in the leisure and gaming sector are likely to remain subdued while the threat of unemployment hangs over many workers.
Manufacturing
Manufacturers are cautiously optimistic about the package. Ian Campbell, managing director of diversified GUD Holdings, which makes everything from electrical appliances to pool equipment, says the boost to the housing sector should permeate throughout the manufacturing sector.
“Every one of these new homes is going to need a toaster and a kettle and a steam iron. Given that we have 25% of the market we’d like to think we are going to get 25% of that new spending.
“But more importantly it’s going to lift consumer confidence more generally and hopefully change spending patterns.”
Manufacturers of insulation (including conglomerate CSR) and solar hot water systems (such as Rheem) should also benefit.
Media
Nothing specific for this struggling sector, although any boost in advertising would be welcome.
Property
Another big winner. The Government has set aside $6.6 billion for public housing and defence housing, as well $2.7 billion for incentives for insulation and solar hot water systems. These spending measures and the cash handouts should help boost activity across the sector, from tradesman to property managers.
Resources and energy
Nothing specific for this sector, although spending on infrastructure project should help clear some of the blockages in the supply pipeline.
Retail
The retail sector is thrilled with the $12.7 billion in cash handouts for low and middle income earners. The big question; how much will be saved and how much will be spent? Retailers such as Gerry Harvey have indicated that the December stimulus package helped provide a temporary boost for the sector, so these handouts should have a similar impact.
Telecommunications
Nothing specific for this sector, although the Government’s additional 30% tax deduction for eligible assets should help drag forward some spending on the sector’s products and services.
Transport and logistics
The transport sector will welcome the $890 million spend on road, railways and local infrastructure, which should help productivity in the longer term. A general increase in economic activity should also increase demand in the sector
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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