While some people would argue that Joe Hockey's second Federal Budget was jam-packed with unrealistic forecasts and decisions designed to save the government from a heavy fall at the next election, others will see it as a necessary measure to stimulate Australia's stagnant economy.
The Liberals faced enormous voter backlash after last year's "Horror Budget" was read out whereby consumer and business confidence levels were dragged through the dirt. This year, Hockey took a different and arguably riskier approach by announcing more than $10 billion of support to families and small businesses, designed to improve the nation's workforce participation rate and overall levels of confidence.
Here are three key changes proposed in last night's budget, and how you can profit from them:
Childcare subsidies
Indeed, one of the most discussed policies in the lead-up to yesterday's budget announcement was the changes being made to Australia's childcare system.
The government last night confirmed that it would devote an additional $3.5 billion to the system (contingent on the Senate passing stalled welfare cuts from the 2014 budget) to not only make childcare more accessible and affordable for families, but also to encourage parents to get back to work sooner.
Low income families can expect up to 85% in funding support while higher income families would receive a lower level of support. The system also recognises the need for childcare fees to grow, which is certainly an encouraging sign for companies operating within the sector.
As I highlighted yesterday, investors wanting to profit from these changes could look to buy into companies such as Folkestone Education Trust (ASX: FET), Affinity Education Group Ltd (ASX: AFJ) and G8 Education Ltd (ASX: GEM). G8 Education is particularly appealing right now given its solid growth prospects, generous dividend yield and its discounted share price.
Small Businesses
The government also recognised the need to get small businesses firing again. Not only did it lower the tax rate for incorporated small businesses by 1.5% (down to 28.5%), it also offered an immediate tax write-off for all individual assets costing $20,000 or less. Hockey admitted that he wouldn't care if the decision resulted in a greater revenue loss than the allocated $1.8 billion for accelerated depreciation, as this would reflect businesses were spending more and helping the economy return to growth.
This not only comes as great news for the small businesses themselves, but also for businesses that lend to them. Australia and New Zealand Banking Group (ASX: ANZ) could experience greater demand for small business loans, although the impact on its overall earnings is likely to be far less than that recognised by companies such as Thorn Group Ltd (ASX: TGA) and Flexigroup Limited (ASX: FXL).
GST changes
The government will also move to close what it refers to as the 'digital tax loophole' where it will charge customers more tax for digital purchases. While it has also often been referred to as the "Netflix tax", GST will soon be charged on products such as digital movies and music which will come as great news for local companies which are already forced to charge the tax, including video streaming services Stan and Presto (Netflix's Australian-based rivals).
It will also come as good news for retailers such as JB Hi-Fi Limited (ASX: JBH). JB Hi-Fi has its own digital service which will become more competitive when international rivals are also forced to charge a tax. While JB Hi-Fi's shares have soared recently, investors could look at buying the stock should it fall back in price in the near-future.
