Domestic demand in Australia faces both obstacles and opportunities. Higher interest rates are increasing mortgage stress and encouraging frugality among households, particularly those that do not work in commodity-related industries. Although the process of deleveraging among large corporates may be in its final stages as credit growth resumes, smaller corporates face tighter credit conditions as they are exposed to the more vulnerable sectors of Australia's economy. Australia's strong employment figures are bolstering the prospects for domestic demand, and this trend is expected to continue through 2011, alongside improving terms of trade, which are boosting national income.
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