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”.

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

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.

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