Last week’s 2024-2025 Federal Budget marked the Labor government’s second surplus since taking power in 2022.

The $9.3 billion surplus underscores Australia’s economic resilience, with the country held up by the mining sector and selling houses to each other. Recognising the strategic importance, the government has allocated a $22.7 billion Future Made in Australia package to catalyse private investment in net-zero industries, positioning Australia as a leader in the global sustainability transition.

Tax cuts for all income taxpayers from July 1st, a $300 household energy rebate, and measures to boost housing supply and affordability are expected to stimulate consumer spending. Could this further benefit resilient retail companies? It wasn’t all homes and mines, the childcare sector also received additional funding to attract and retain staff.

As Australia navigates the post-pandemic era and sustainability challenges, this budget presents strategic opportunities for ASX-listed companies across multiple sectors.

 

The $22.7 billion Future Made in Australia package was the cornerstone of the budget as the government looks to secure its role in the global shift to net zero emissions.

The mining sector is a key focus, with $8.8 billion allocated over the decade to add value to resources and strengthen critical minerals supply chains. This includes a $7 billion production tax incentive for processing and refining critical minerals. Up to $1.2 billion will fund strategic critical minerals projects through existing facilities. $566.1 million will support Geoscience Australia in mapping critical minerals resources, aiding junior explorers.

The budget also streamlines approvals for nationally significant renewable projects and foreign investment decisions. Overall, the measures position Australia’s mining industry as pivotal to the net zero transition and global supply chains for minerals like lithium, nickel and rare earths.

Green technologies like green hydrogen, renewable energy generation and rechargeable battery manufacturing are set to benefit with Lynas Rare Earths (ASX: LYC), BHP Group (ASX: BHP), Pilbara Minerals (ASX: PLS) and Fortescue (ASX: FMG) potential winners.

 

The government announced several measures aimed at addressing housing affordability and increasing supply, which could significantly impact the housing market and related industries.

Labour committed an additional $6.2 billion in new housing investment, bringing the total to $32 billion under the administration. This includes $1 billion to assist states and territories in building more homes and increased funding for student accommodation. $16.5 billion was allocated for infrastructure projects to better connect cities and towns, facilitating housing development in well-connected areas. To address the skilled labour shortage hindering the home building sector, the government announced $90.6 million in spending to attract more apprentices, provide fee-free training, streamline visa programs for in-demand trades, and implement other measures to boost the skilled workforce.

These initiatives are part of the government’s flagship target to deliver 1.2 million new, well-located homes over five years, starting in July 2024.

However, concerns have been raised about the feasibility of achieving this ambitious goal. Should it be achieved, building materials companies like James Hardie Industries (ASX: JHX), a leading fiber cement manufacturer, and Boral (ASX: BLD), a major supplier of construction materials, could potentially benefit from increased demand.

Monitoring building approvals from the Australian Bureau of Statistics (ABS) will be crucial to assess the impact and effectiveness of these policies in boosting housing supply and addressing affordability challenges.

 

The Australian Government announced further investment in childcare following on from the previous year’s budget.

The new measures expect to deliver net savings of $410.7 million over 4 years from 2024–25 by improving the payment accuracy of the Child Care Subsidy (CCS) program. Further to that investment, the government has committed to provide funding towards a wage increase for the early childhood education and care workforce. We believe this will allow the industry to attract staff and talent to the sector.

A company we hold within the TAMIM fund set to benefit from this is Embark Early Education (ASX: EVO), a leading provider of early childhood education and care services in Australia.

The company currently owns and operates 24 childcare centres with 2,198 licensed places, employing 630 staff who care for approximately 1,800 children daily across Queensland, Victoria, New South Wales, Tasmania, and South Australia. Originally incorporated in New Zealand and listed on the NZX as Evolve Education Group Limited, the company underwent a scheme of arrangement in June 2023. This involved swapping shares in the New Zealand entity for shares in a newly incorporated Australian company, Embark Early Education Limited, which was admitted to the official list of the ASX. This redomiciling process allowed the company to focus solely on its Australian operations after divesting its New Zealand business in 2022.

Embark Early Education reported strong financial results for the calendar year 2023.

Revenue increased by 16% to $63 million, and Centre operating earnings rose by 30% to $17.1 million compared to the previous year. Profit for FY2023 was $8.16 million, and the company paid two fully franked dividends of 2 cents each in August and November 2023. The company maintained a disciplined approach to cost control, with support office costs remaining well below the relative level of ASX-listed peers in the sector.

A key factor contributing to Embark’s strong performance was its high occupancy levels.

Average annual occupancy increased by 2.3 percentage points to 82.4%, with peak occupancy reaching 86.1% in late November 2023, significantly higher than other ASX-listed operators in the sector. The company’s financial position is strong, with cash reserves of $26 million as of December 2023.

 

The 2024-2025 Federal Budget outlines a comprehensive roadmap for Australia’s economic future, catalysing growth across strategic sectors.

With substantial investments in mining, housing, and childcare, the government aims to harness the nation’s strengths while navigating the global sustainability transition. The initiatives present lucrative opportunities for ASX-listed companies well-positioned to capitalise on emerging trends.

Time will be the ultimate judge of its efficacy but there can be no doubt that a number of ASX companies are poised to benefit.

Disclaimer: BHP Group (ASX: BHP), Pilbara Minerals (ASX: PLS), Fortescue (ASX: FMG), Boral (ASX: BLD) and Embark Early Education (ASX: EVO) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.