Iceland country brief


Iceland, the least populated of the Nordic countries, is an island located in the North Atlantic Ocean. Iceland covers an area of 103,000 square kilometres and has a population of approximately 322,000.

While Iceland is not a member of the European Union (EU), it is a member of the European Free Trade Association (EFTA) and the European Economic Area, which entitles it to access the EU internal market. Iceland is a member of 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 Ólafur Ragnar Grímsson. In Presidential elections held in June 2012, President Grímsson won his fifth term. The next Presidential election will be held in June 2016. In March 2016, President Grímsson announced he would step down and not contest the next election.

The Althing is made up of 63 members directly elected by proportional representation for four year terms. Following general elections in April 2013, the centrist Progressive Party (PP) and the centre-right Independence Party (IP) formed a government led by Progressive Party Chairman, Sigmundur Davíð Gunnlaugsson, as Iceland’s Prime Minister. However, on 5 April, Gunnlaugsson stood down in light of alleged financial assets and dealings exposed by the ‘Panama Papers’ scandal. Mr Sigurdur Ingi Johannsson was appointed Prime Minister. General elections are expected to be held in late 2016.

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 an 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 November 2014, the OECD reported that economic growth had strengthened and GDP was approaching its pre-crisis peak level with 2.9 per cent GDP in 2014. Lower inflation, exchange rate stability, declining unemployment 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 rejoined the International Whaling Commission in 2002 after having left the organisation in 1992. There is a small Icelandic community in Australia, with around 930 Australians claiming Icelandic ancestry according to the 2011 census.

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 on Thursday 7 April 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 President Grímsson.

Bilateral economic and trade relationship

Two way merchandise trade between Australia and Iceland was A$25m in 2014-15. In this period, Australian exports to Iceland totaled A$ 2.4 million, including measuring and analysing equipment, telecom parts and equipment and alcoholic beverages. Australian imports in 2014-15 totaled A$22.5 million and included food processing machines and parts, medicaments (including veterinary) and non-electrical machinery and parts.

Last updated: April 2016.

Last Updated: 18 April 2016