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Rate cuts show more trouble ahead -

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Rate cuts show more trouble ahead

Broadcast: 03/02/2009

Reporter: Raphael Epstein

Today's cut of another one percentage point takes official interest rates to their lowest level
since the 1960s. While that is a big help for those with big debts like a mortgage, it is also a
sign that the Reserve Bank is worried even more trouble is on the way.

Transcript

TONY JONES, PRESENTER: Today's cut of another one percentage point takes official interest rates to
their lowest level since the 1960s. And while that certainly helps those with big mortgages, it's
also a sign the Reserve Bank is worried even more trouble is on the way.

People are already starting to lose jobs and fall down the housing ladder, with caravan parks the
only option for many.

As Rafael Epstein reports, more and more people are suddenly finding themselves in serious
financial trouble.

RAFAEL EPSTEIN, REPORTER: It's a very long way from the great Australian dream of your own quarter
acre block. But 25-year-old Robert Cooper, who works part-time as a butcher, is lucky: he got into
one of Melbourne's better caravan parks.

ROBERT COOPER, CARAVAN PARK RESIDENT: I was living in a pretty awful place for a while in Footscray
and I definitely had to get out there. And I couldn't find any rental accommodation, so I came
here. It's cheap to move in and ... I don't know.

RAFAEL EPSTEIN: Caravan parks are already home to around 50,000 Australians. With a stalling
economy that needs interest rates to be slashed to their lowest level in decades, that number will
grow.

ROBERT COOPER: Sometimes it's a bit embarrassing sorta telling people that you live in a caravan
park, you know? But, oh well, it's just one of those things. It's a roof, and it's not too bad, you
know. Like, it'd do the trick for now, I suppose.

RAFAEL EPSTEIN: The Reserve Bank isn't sure what will do the trick right now. They've cut the cash
rate a full one per cent to three and a quarter per cent. It means the standard variable home
mortgage rate is back to where it was in the '50s and '60s. And it means the Reserve is still
worried.

RICHARD GIBBS, MACQUARIE GROUP: There are certainly signs of concern about the further
deterioration we've seen in the global economic and also the appreciable slowing we've seen in
Chinese economic expansion in the last three months. And the Bank does make specific note of those
two factors.

RAFAEL EPSTEIN: Leigh Shortis works on building sites as a carpenter. He's been living here with
his partner Ivy Barnes for months. The ever-worsening economic forecast has him now predicting
he'll have to stay somewhere he never thought he'd be.

LEIGH SHORTIS, CARAVAN PARK RESIDENT: No, not really. No, I thought we were renting - when we were
renting it was fine, but it was getting harder and harder and harder. Prices were going up and up
and up, you know? And we had no choice. We actually were lucky to get into here because we were
looking at living in a car.

IVY BARNES, CARAVAN PARK RESIDENT: Oh, my dream home was to own a home and - or to rent a home. But
you can't anymore.

RAFAEL EPSTEIN: The rate cut and the stimulus package will help the building sector that Leigh
works in. He simply tries not to be bitter. He expects to die here, a place he says is not his
ideal home.

LEIGH SHORTIS: Oh, it's just yelling and screaming. You know, just, well, living in a caravan park.
It's not the greatest place to live. Unless you, you know, unless you actually want to live here.
And a lot of people don't want to live here, but they've got no choice. I think it's going to get a
lot worse. There's going to be a lot more people living in tents or caravan parks.

RAFAEL EPSTEIN: At Fountain Gate Shopping Centre in Melbourne's south east, the sales are
permanent. In one of Australia's fastest growing areas, the unemployment rate may still be
relatively low, but more and more people are getting into financial trouble.

SUSAN MAGEE, MANAGER, COUNSELLING SERVICE: We're seeing a lot more middle income earners, a lot
more families that are actually wage earners, rather than Centrelink recipients. We're seeing a lot
more families that have enormous accumulated debt.

RAFAEL EPSTEIN: Susan Magee runs the local council's financial crisis support centre. She says her
big growth area is people with a car, a big TV and a mortgage who now cannot afford to buy food.

SUSAN MAGEE: Anger , despair, depression, the pressure that it places on families is enormous. We
were already seeing a lot of people that were experiencing family breakdown; that has increased
enormously. It's awful. Almost every new client that we see said, "I never thought I'd be in this
situation." And they're crying, they're desperate. It's really demoralising for people to have to
come in and say, "I just can't afford to buy the basic needs for my family."

RAFAEL EPSTEIN: And that includes families who keep the kids home from school because they can't
afford to send their children off with a packed lunch.

Susan Magee says a cheaper mortgage and government stimulus payments are always welcome.

SUSAN MAGEE: A lot of the people that have come to us have been quite wise. They've used that money
to cover some of their debt. They've used it to, perhaps, repair the car, the family car that was
desperately in need. The reduction in mortgage rates has definitely helped some families.

RAFAEL EPSTEIN: As they shop on, Susan Magee sent a letter to the Prime Minister, pleading for more
funding to help clients like hers who can no longer afford to go shopping. Rafael Epstein,
Lateline.