By Jane Wardell
SYDNEY (Reuters) – Australia’s hard-pressed retailers received a boost from the federal budget as investors scrambled on Wednesday to buy shares in the sector, counting on a surprise tax break to help small businesses spend more on office supplies.
In a budget designed to boost small firms and stimulate the country’s limping economy, mining services companies also benefited from the announcement of a A$5 billion ($4 billion) loan facility to promote infrastructure investments in remote northern Australia.
Major department store chain Myer Holdings Ltd was the top mover in the S&P/ASX 200 index in the first trading session following the release of the budget late on Tuesday, rising 8.1 percent.
Consumer and industrial products supplier GUD Holdings Ltd, which also announced its acquisition of lighting supplier Brown & Watson, was the second-biggest mover, gaining 6.5 percent.
The government is offering an immediate tax deduction to small businesses buying any office supplies or other assets which cost less than A$20,000 ($16,000) – an unexpected and significant shift upward from the previous threshold of A$1,000.
Businesses can claim the tax break repeatedly on qualifying items as the government seeks to smooth the Australian economy’s transition away from a fading mining boom. The initiative will cost the budget A$1.75 billion over four years.
“As our economy changes, the role of small businesses will be even more important,” Treasurer Joe Hockey told reporters late Tuesday. “With the economy in transition, we are freeing up small business to create new jobs.”
Electrical goods retailers were particular standouts, with Harvey Norman Holdings Ltd trading at its highest since February 2008, and JB Hi-Fi Ltd performing its best for just over a year. Shares in Dick Smith Holdings Ltd, and Woolworths Ltd also rose.
Still, some cautioned that limitations to the new pool of funds compared to the size of the country’s gross domestic product meant businesses were unlikely to embark on an unrestrained shopping spree.
“It is notable that all of the initiatives delivered in this budget are in the millions per annum – not billions,” said Damien Boey, an equity strategist at Credit Suisse. “They are marginal in size as a percentage of GDP.”
Elsewhere in the market, mining services firms including Cimic Group Ltd, WorleyParsons Ltd, Downer EDI Ltd and UGL Ltd made gains following the budget announcement of the new loan facility, aimed at improving roads and supply chains for livestock and agriculture in Australia’s north.
Both state and private companies will be able to appeal to the government for access to the new facility, which will lend at cheap interest rates.
(Editing by Kenneth Maxwell)