Iceland country brief


Iceland, the least populated of the Nordic countries, is located in the North Atlantic Ocean. Iceland covers an area of 103,000 square kilometres and has a population of approximately 327,000 (2012).

While Iceland is not a member of the European Union, 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 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). The Head of State, President Ólafur Ragnar Grímsson, is now serving his fourth term in office In Presidential elections held in June 2012, President Grímsson won his fifth term. The next Presidential election will be held in 2016.

The Althing is made up of 63 members directly elected by proportional representation for four year terms. Following the 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.  With 38 of the 63 seats in the Althing, the coalition holds a comfortable majority.  The previous government, led by the Social Democratic Alliance leader, Ms Sigurðardóttir, began accession talks for Iceland to join the EU.  The Icelandic Government formally applied to join the EU on 16 July 2009.  The new government has put the EU accession negotiations on hold and has stated that it would not continue these negotiations without a referendum.

The election marks a return to centre-right politics. In January 2009, the coalition government comprising the centre-right Independence Party and the centre-left Social Democratic alliance was disbanded following unprecedented public protests over the government’s handling of the economy and the resignation of then Prime Minister, Mr Geir H. Haarde. 

Economic overview

As one of the smallest countries in the world, Iceland's economy is particularly vulnerable to global economic fluctuations and was severely affected by the global financial and economic 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. On 24 October 2008, the International Monetary Fund (IMF) announced an IMF rescue package totalling US$2.1 billion for Iceland to address the effects of the global financial crisis. The Icelandic economy shrank 6.6 per cent in 2009 and 4.1 per cent in 2010.  The economy has steadily recovered since then, showing growth of 2.9 per cent in 2011 and 1.6 per cent in 2012.  The IMF forecasts GDP growth of 1.9 per cent in 2013.

Over eighty per cent of Iceland's energy is renewable, resulting in environmental, economical and social advantage for the country. One hundred per cent of electricity and heating for Icelandic homes is produced from domestic renewable (hydro and geothermal) energy resources.

Bilateral relationship

Iceland established diplomatic relations with Australia 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 of around 930 people.

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 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$14m in 2012.  Australian exports to Iceland totaled A$3.4 million, including jewellery, pearls and gems, measuring and analysing equipment, and alcoholic beverages.  Australian imports in 2012 totaled A$10.6 million and included pig iron, medicaments (including veterinary), animal oils and fats and orthopaedic appliances.

Last updated: July 2013

Last Updated: 26 July 2013