Iceland country brief

Overview

Iceland is a Nordic island country located in the North Atlantic Ocean. Iceland covers an area of 103,000 square kilometres and has a population of approximately 336,000, making it the least populated of the Nordic countries.

Iceland is not a member of the European Union (EU), but is a member of the European Free Trade Association (EFTA) and the European Economic Area, which entitle it to access the EU internal market. Iceland is a member of numerous international organisations including the United Nations (UN), the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), North Atlantic Treaty Organisation (NATO), the Organization for Security and Cooperation in Europe (OSCE) and the Arctic Council.

Political overview

Iceland is a parliamentary republic with legislative powers vested in the Althing (Parliament). Iceland’s Head of State is President Guðni Thorlacius Jóhannesson, the sixth President of Iceland. In Presidential elections held in 2016, President Jóhannesson won his first term and took office in August 2016. The next Presidential election will be held in June or July 2020.

The Althing is made up of 63 members directly elected by proportional representation for four-year terms. Parliamentary elections were most recently held on 28 October 2017, following the collapse of outgoing Prime Minister Bjarni Benediktsson’s three-party, centre-right coalition government, only nine months after it had taken office.

Eight parties surpassed the threshold to enter the Althing. Benediktsson’s Independence Party lost five of its previous 21 seats, retaining 16. It was followed by the Left-Green Movement, with 11 seats; the Progressive Party, with eight seats; the Social Democratic Alliance, with seven seats; the newly formed Center Party, led by former Prime Minister Sigmundur Davíð Gunnlaugsson, also with seven seats; the Pirate Party, with six seats; the Peoples Party, with four seats; and the Restoration Party, also with four seats. Coalition negotiations could take some time.

Economic overview

Iceland was severely affected by the global financial crisis. The Icelandic economy experienced high levels of volatility in 2008 and suffered a collapse in the banking system. In October 2008, the government took control of the three big Icelandic commercial banks and the International Monetary Fund (IMF) announced a rescue package totalling US$2.1 billion. The Icelandic economy shrank 6.6 per cent in 2009 and 4.1 per cent in 2010. Since this time, Iceland’s economy has made a steady recovery. In 2016 real GDP growth was 7.2 per cent, with 5.7 per cent forecast for 2017.Declining unemployment (3 per cent in 2016) and improved fiscal accounts are all signs of macroeconomic normalisation. A surge in tourism is contributing to Iceland’s economic recovery.

Over 80 per cent of Iceland's energy is renewable and 100 per cent of household electricity and heating is produced from domestic renewable (hydro and geothermal) energy resources.

Bilateral relationship

Australia and Iceland established diplomatic relations on 17 April 1984. Australia's relations with Iceland are friendly with whaling the only major issue of disagreement. Iceland re-joined the International Whaling Commission in 2002 after having left the organisation in 1992. According to the 2016 census, almost 1,100 Australians claim Icelandic ancestry.

In August 2008, Australia and Iceland, together with the United States, signed a Memorandum of Understanding on cooperation in geothermal technology.

The Australian Ambassador to Iceland is accredited from Denmark. The Icelandic Ambassador to China has non-resident accreditation to Australia. Iceland has Honorary Consulates in Sydney and Melbourne.

High level visits

In April 2016, Iceland’s Ambassador to Australia, Mr Stefan Skjaldarson, presented his credentials to the Governor-General and held bilateral meetings in Canberra and Sydney. In October 2002, Australia’s Minister for Communications, Information Technology and the Arts, Senator the Hon Richard Alston, visited Iceland and met then President Grímsson.

Bilateral economic and trade relationship

In 2016, Australia’s total trade in goods and services with Iceland was worth $256 million. Two-way merchandise trade was $233 million. Much of the recent growth in the trading relationship has been driven by a steep increase in Australia’s alumina exports to Iceland, which grew from a very low base in 2015 to $217 million in 2016. This reflects Iceland’s integration into global product chains with multinational aluminium producers shipping bauxite mined and refined in Australia to Iceland for smelting into aluminium, taking advantage of Iceland’s cheaper renewable energy prices. Australian imports in 2016 totalled $16 million and included medicaments (including veterinary), animal oils and fats, miscellaneous manufactured articles and civil engineering equipment and parts. Total foreign investment between Australia and Iceland reached $35 million in 2016.

Last updated: November 2017

Last Updated: 18 April 2016