## Budgets bounce like dead cats

Posted by Possum Comitatus on May 17, 2007

I thought I’d use the newspoll results back to 1985 to see if the journo cliche of choice come May – “the budget bounce” was nothing more than a fantasy driven by people that have nothing better to say.

Surprise surpise, that’s the case.

So I also tested the excuse of choice for journo’s and governments alike when the polls dont react the way they apparently ought to – “its a delayed bounce, it hasnt happened yet, but it will happen”.

Surprise, surprise….. that’s twaddle too.

Using the series GOVPRIMARY (which is the newspoll measurement of the governments primary vote) as the dependent variable, I regressed it against 3 seasonal dummy variables S5, S6,and S7 representing the months of May, June and July respectively.If budgets actually do cause a bounce in the government vote in the polls, those seasonal dummy variables would be expected to have a positive coefficient.If those bounces happen as regularly as the commentariat believes, they should also be statistically significant i.e. the Prob value should be less than 0.1, preferably less than 0.05.

So let us see the results (a usual constant C was also added to the mix – just ignore it)

Again, using the quaint little Eviews to do the ugly math:

Dependent Variable: GOVPRIMARY | ||||

Method: Least Squares | ||||

Date: 05/17/07 Time: 17:05 | ||||

Sample(adjusted): 1986:01 2007:05 | ||||

Included observations: 257 after adjusting endpoints | ||||

Convergence achieved after 5 iterations | ||||

Variable | Coefficient | Std. Error | t-Statistic | Prob. |

C | 42.37000 | 0.688365 | 61.55166 | 0.0000 |

S5 | -0.085694 | 0.502248 | -0.170621 | 0.8647 |

S6 | -0.686960 | 0.583794 | -1.176716 | 0.2404 |

S7 | -0.429398 | 0.511557 | -0.839394 | 0.4020 |

AR(1) | 0.774224 | 0.039983 | 19.36391 | 0.0000 |

R-squared | 0.598817 | Mean dep var | 42.437 | |

Adjusted R-squared | 0.592449 | S.D. dep var | 3.8455 | |

S.E. of regression | 2.454982 | Akaike | 4.6533 | |

Sum squared resid | 1518.788 | Schwarz | 4.7224 | |

Log likelihood | -592.9593 | F-statistic | 94.035 | |

Durbin-Watson stat | 2.216458 | Prob(F-statistic) | 0.0000 |

Lo and behold, all of the seasonal dummy variables are utter rubbish.They have no statistical significance and some of the coefficients are negative.Budgets dont bounce polls.

What about just over the Howard term of government.:

Dependent Variable: GOVPRIMARY | ||||

Method: Least Squares | ||||

Date: 05/17/07 Time: 10:43 | ||||

Sample: 1996:03 2007:05 | ||||

Included observations: 135 | ||||

Convergence achieved after 3 iterations | ||||

Variable | Coefficient | Std. Error | t-Statistic | Prob. |

C | 43.11803 | 0.745668 | 57.82469 | 0.0000 |

S5 | 0.334513 | 0.688051 | 0.486174 | 0.6277 |

S6 | -1.320608 | 0.805286 | -1.639925 | 0.1034 |

S7 | -0.321919 | 0.711838 | -0.452237 | 0.6519 |

AR(1) | 0.713235 | 0.063750 | 11.18798 | 0.0000 |

R-squared | 0.494724 | Mean dep var | 43.110 | |

Adjusted R-squared | 0.479177 | S.D. dep var | 3.3607 | |

S.E. of regression | 2.425422 | Akaike | 4.64622 | |

Sum squared resid | 764.7476 | Schwarz | 4.7538 | |

Log likelihood | -308.6200 | F-statistic | 31.821 | |

Durbin-Watson stat | 2.030240 | Prob(F-statistic) | 0.0000 |

Again – utter twaddle.

Budgets dont give governments a bounce in the polls.It is not in any way an expected voter behaviour

** UPDATE :**GriffithGuy raised an interesting question.Do budgets bounce in election years when the pork is flying?

Lets test the theory again, but this time using dummy variables representing only budgets in election years.First for all governments since 1986:

Dependent Variable: GOVPRIMARY | ||||

Method: Least Squares | ||||

Date: 05/18/07 Time: 01:17 | ||||

Sample(adjusted): 1986:01 2007:05 | ||||

Included observations: 257 after adjusting endpoints | ||||

Convergence achieved after 6 iterations | ||||

Variable | Coefficient | Std. Error | t-Statistic | Prob. |

C | 42.27549 | 0.684618 | 61.75049 | 0.0000 |

S5E | 0.466934 | 0.832840 | 0.560653 | 0.5755 |

S6E | -0.653364 | 0.995129 | -0.656562 | 0.5121 |

S7E | -0.318264 | 0.880077 | -0.361632 | 0.7179 |

AR(1) | 0.774742 | 0.040092 | 19.32387 | 0.0000 |

R-squared | 0.598543 | Mean dep var | 42.437 | |

Adjusted R-squared | 0.592170 | S.D. dep var | 3.8455 | |

S.E. of regression | 2.455822 | Akaike | 4.6540 | |

Sum squared resid | 1519.827 | Schwarz | 4.7231 | |

Log likelihood | -593.0472 | F-statistic | 93.928 | |

Durbin-Watson stat | 2.228653 | Prob(F-statistic) | 0.0000 |

Again, no budget bounce as the coefficients are small and mostly negative, and they are statistically insignificant.

But what about Howard from 1996-2007?

Dependent Variable: GOVPRIMARY | ||||

Method: Least Squares | ||||

Date: 05/18/07 Time: 00:59 | ||||

Sample: 1996:03 2007:05 | ||||

Included observations: 135 | ||||

Convergence achieved after 5 iterations | ||||

Variable | Coefficient | Std. Error | t-Statistic | Prob. |

C | 43.04898 | 0.755544 | 56.97745 | 0.0000 |

S5E | 1.098800 | 1.051503 | 1.044980 | 0.2980 |

S6E | -2.281707 | 1.285617 | -1.774795 | 0.0783 |

S7E | -0.939306 | 1.151982 | -0.815383 | 0.4163 |

AR(1) | 0.723267 | 0.063517 | 11.38701 | 0.0000 |

R-squared | 0.504229 | Mean dep var | 43.110 | |

Adjusted R-squared | 0.488975 | S.D. dep var | 3.3607 | |

S.E. of regression | 2.402501 | Akaike | 4.6272 | |

Sum squared resid | 750.3613 | Schwarz | 4.7348 | |

Log likelihood | -307.3381 | F-statistic | 33.054 | |

Durbin-Watson stat | 2.065642 | Prob(F-statistic) | 0.0000 |

Again no bounce as the coefficients are insignificant, but at the 10% level of significance Howard actually ** loses** over 2% off his primary vote in the June following an election year budget.

Ouch.

## GriffithGuy said

Possum,

Does this include all Budgets over that time?Was there any difference between regular budgets and those in election years, as geovernments tend to save their friendlier come love me budget to election years.

## possumcomitatus said

The regressions contain all of the budgets undertaken within their sample.So for the first regression it contains every budget from 1986 through to the current budget in 2007.The second regression contains all of the budgets that were delivered during just the Howard government.

You’ve raised an interesting point on election year budgets.I just built a dummy variable stack for only budgets in election years and the results are the same for both all governments since 1985 and for the Howard government with one peculiar exception.Under the Howard administration, during election years the Howard government loses 2.3% off their primary vote in June and that coefficient has a p-value of 0.078 meaning its significant at the 10% level.

So to answer your question, governments don’t even get budget bounces in election years.

## Pedro of Canberra said

Late comment, but – Budgets used to be in August? What year did they shift to May? Could this be signficant?

## possumcomitatus said

You’re right Pedro!

1998/99 I think was the first May budget.Going back over the 1985 to 1997 period and testing for budget bounces in the polls for August, September and October get’s the same results:Prob Values for those months of between 0.4 and 0.8.Completely statistically insignificant.

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