Bilateral relationship

As two highly-developed and complementary G20 economies with robust international engagement
and enduring people-to-people ties, Australia and Italy share a warm relationship with much scope
for expansion.  Our cooperation intensified in 2014 during Australia’s chairmanship of the G20 and
Italy’s Presidency of the European Union.

According to the 2011 census, 916,120 Australians claimed Italian ancestry with 185,402
Australian residents having been born in Italy.

Australia and Italy have concluded bilateral agreements covering culture, double taxation, air
services, economic and commercial cooperation, reciprocal social security and health care benefits,
and film co-production.  A bilateral Working Holiday Maker Arrangement became operative in
January 2004.  During 2013-14, 16,045 working holiday visa were granted to Italian citizens (up 0.5
per cent on the previous year).

The two countries have also signed a number of Memoranda of Understanding (MOUs) covering
science and technology cooperation, defence materiel, defence industry, motor vehicle safety
certification, sports cooperation, game meat exports and trade cooperation.  In April 2013 an
updated science and technology MOU was signed. In July 2009 an MOU was signed regarding
cooperation on the Square Kilometre Array, an international advanced radio-telescope project.
Several state governments have signed MOUs with Italian regional governments to promote
cooperative activities and exchanges between the two parties.

Bilateral economic and trade relationship

Italy is a significant market for Australia.  It is one of our largest trading markets in the European
Union (EU) and in 2013-14 was our 15th largest merchandise trading partner globally.  Two-way
merchandise trade in 2013-14 was $6.7 billion, in Italy's favour by a ratio of almost 8:1.  Items such
as wool, coal, leather and beef dominated the mix of Australian exports.  Major Australian imports
from Italy in 2013-14 included medicaments, pumps, electric plant and non-electric engines and
motors.

Against the backdrop of one of Italy’s longest economic recessions, tourism arrivals from Italy to
Australia grew 97.6 per cent to 72,463 during 2013-14.  Expenditure by Italian visitors in Australia
rose 21.3 per cent to $519m in the same period.  In the year ending June 2014, Italy was Australia’s
15th largest outbound market, with 177,737 departures to Italy.

Italian investment in Australia is relatively low, reflecting Italy's focus within the EU and
Mediterranean area. However, there has been a recent welcome interest by Italian companies in
investing in Australia including as an entry-point to the dynamic Indo-Pacific region.  Total stock of
investment from Italian companies in Australia in 2013 was worth over $2.2bn.  Australian
investment in Italy in 2013 was worth almost $5 billion.  A number of Australian companies,
including Lend Lease, architectural firm Woodhead and Cochlear, have business interests in Italy.
Westfield is investing in a new shopping mall project in Milan which, when completed, will be
worth around $1.3bn.
Economic overview
Italy has a highly-developed and sophisticated industrial base supported by a strong medium to
small enterprise sector, the majority of which is family owned or controlled.  Nonetheless, Italy
faces some serious economic challenges.

For the last decade, economic growth has barely exceeded one per cent per annum (GDP is forecast
to have contracted 0.4 per cent in 2014) reflecting stagnant productivity, weak demand, tight credit
conditions, fiscal adjustments and depressed confidence.

Unemployment has hovered around 12.9 per cent since January 2014.  In addition, Italy is divided
into a developed industrial north and less-developed south.

Foreign Direct Investment (FDI) remains below the levels achieved by benchmark competitors.
Outward Italian FDI is limited and is largely concentrated in Europe and the Mediterranean.

Italian exports have been falling as a percentage of global trade. Most raw materials needed for
manufacturing and more than 80 per cent of the country's energy sources are imported.

As the first country in the world to record more people aged over 65 than under 15, Italy's low
fertility rate and rapidly aging population place a strain on its economy.

Italy has a very high ratio of home ownership and very low household and company debt, but public
debt has increased steadily since 2007 exceeding 130 per cent of GDP in 2014.

Going forward, the combination of lower oil prices, a weak Euro and important structural reforms
may sustain opportunities to restart growth.