Why Rates Matter
Posted by Possum Comitatus on October 26, 2007
Me in Crikey yesterday HERE
Yesterdays post “Rates of Gloom” was actually a more in-depth spin-off of this post, so for those of you struggling to follow the stats, this should make everything a lot clearer.
In Rates of Gloom we just modelled the relationship we see below, but also accounted for the effect of leadership changes (the leadership dummy variables) and the honeymoon period that both leadership changes and interest rate rises enjoy (through the time trend variable). Just as the leadership changes of Latham and Rudd increased the ALP vote before it declined from that peak slowly over time as the honeymoon ended, so to with an interest rate rise. After a rate rise, the ALP vote moves up, but then slowly over time it pulls back slightly. There are more complicated ways to model that type of behaviour, but the time trend variable did the job adequately.
So if you read this post first and keep the above in your thought orbit, for those of you not big on the stats side of things it should make Rates of Gloom a bit easier to follow.
With interest rates and widespread navel gazing about the political consequences taking up the media-space, today instead of picking the verbal lint from our bellybuttons over the issue, how about we go to some spiffy little charts that sum up perfectly the millions of words that will be written over the next month.
First up, let’s run the RBA cash rate against the PM dissatisfaction rating over the period 1999-2007, using Newspoll monthly averages for the latter:
Now how is that for a snazzy little leading indicator!
Next up we’ll run the cash rate against the Opposition primary vote over the same period using Newspoll monthly averages:
One word sums that up – Ouch.
Now for the relationship between the Opposition primary vote and the PM dissatisfaction rating:
And that sums up the debate – three graphs are worth a million words.
The only question becomes whether interest rate increases lift the Opposition primary vote directly, whether it increases the Opposition primary vote via PM Dissatisfaction or whether it works via both channels?
As far as the Coalition is concerned however, it’s probably a moot point.
I was just informed of a pretty spiffy site:
“Soapbox is a unique Australian political archive of
federal elections, bringing together key historical documents and
audio-visual material, and making them available to students, researchers,
journalists and the general public.”
It’s a cracker of a site if you are into historical election material. Very, very, very much worth a visit: