Italy country brief

Australia and Italy enjoy a warm and long-standing relationship underpinned by strong community ties. Trade and investment and the development of cultural and educational links continue to grow. According to the 2006 census, 852,418 Australians claimed Italian ancestry with 199,124 Australian residents having been born in Italy. At least 30,000 Australians are estimated to live in Italy.

Political overview

The constitution of Italy was adopted in 1947, following a referendum on 2 June 1946 that abolished the Italian monarchy and established Italy as a parliamentary republic. The constitution came into effect on 1 January 1948 and established a bicameral parliament (Chamber of Deputies and Senate), a separate judiciary, and an executive branch composed of a Council of Ministers headed by the President of the Council (Prime Minister). The constitution also created the position of President to fulfil the ceremonial roles of the (former) Italian monarchy. Giorgio Napolitano was elected by Parliament as the eleventh President of the Italian Republic in May 2006. Silvio Berlusconi was appointed Prime Minister following elections on 8 May 2008.

Both houses of parliament are directly elected and are of equal authority. The electoral system in the Senate is based upon regional representation. The Chamber of Deputies has 630 members and the Senate 315 elected senators; in addition, the Senate includes former presidents and several other persons appointed for life according to special constitutional provisions. Both houses are elected for a maximum of five years, but either may be dissolved before the expiration of its normal term. Legislative bills may originate in either house and must be passed by a majority in both.

In the 2006 elections, Italians living abroad (about 2.7 million people), were eligible to vote for the first time, and elected 12 members of the Chamber of Deputies and six Senators representing four overseas divisions: Europe; South America; North and Central America; and, Africa, Asia, Oceania and the Antarctic.

Italy is divided into regions, provinces and municipalities. The constitution lists 20 regions, which are further divided into 95 provinces. Of the 20 regions, five enjoy special constitutional status: Friuli-Venezia Giulia, Sardinia, Sicily, Trentino-Alto Adige and Valle d'Aosta. The regions are responsible for electing their own regional parliaments that exercise substantial autonomy.

Economic overview

The Italian economy has changed dramatically since the end of World War II. From an agriculture-based economy, Italy has developed into an industrial state ranked as the world's seventh largest economy. The country belongs to the Group of Eight (G8) industrialized nations (and holds the G8 Presidency in 2009); it is a member of the European Union, the G20 and the OECD.

Most raw materials needed for manufacturing and more than 80 per cent of the country's energy sources are imported.

Italy's economic strength is in the processing and manufacturing of goods, primarily in small and medium-sized enterprises. The majority of these enterprises are family-owned and are focused on the domestic market. Italy's major industries are tourism, precision machinery manufacturing, textiles, chemicals, pharmaceuticals, food processing, motor vehicles, electrical goods, furniture, clothing and footwear.

Italian GDP growth averaged 0.6 per cent a year in the period 2001-05, recorded levels around 2 per cent in 2006 -2007 and then the country slumped into recession with a 1 per cent contraction in GDP in 2008. A further contraction of around 5 per cent is forecast for 2009.

Since 1995, Italy’s share of world trade has fallen from 4.6 per cent to around 3.6 per cent, although in recent years its export performance has been robust, especially compared to other industrialised countries. Italy’s balance of payments situation is not helped by its significant dependence on energy imports, especially oil and gas. Foreign Direct Investment (FDI) in Italy remains well below the levels achieved by its benchmark competitors and outward Italian FDI is also limited. Unemployment stood at 7.9 per cent at the end of March 2009, significantly up on the low of 5.7 per cent at the end of 2008. There remains a sharp disparity between the near full employment enjoyed in the north and the double-digit unemployment rates in the south.

Italy has a rapidly aging population and was the first country in the world to record more people over 65 than under 15. There are concerns that the current social security system, which is heavily skewed towards pension provision, will not prove sustainable. Pensions accounted for around 14 per cent of Italy's GDP in 2008. The Italian Government has introduced some reform of the pension system in an attempt to reduce this burden.

Bilateral relationship

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. 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 July 2009 an MOU was signed regarding cooperation on the Square Kilometre Array. A bilateral Working Holiday Maker Arrangement became operative on 2 January 2004. Many state governments have signed MOUs with Italian regional governments to promote cooperative activities and exchanges between the two parties.

There are a range of Australian business groups in Italy, including the Italy-Australia Business Council, Australian Business in Europe (ABIE) in Milan and the Australian Business Network in Rome.

High-Level Visits

(Note: Positions indicated in the list below were held at the time of the visits)

To Italy

2009

• The Hon Kevin Rudd, MP, Prime Minister
• The Hon Penny Wong, MP, Minister for Climate Change and Water
• The Hon Martin Ferguson, MP, Minister for Resources and Energy
• The Hon Tony Burke MP, Minister for Agriculture, Fisheries and Forestry
• The Hon Bob McMullan MP, Parliamentary Secretary for International Aid

2008

• The Hon Stephen Smith MP, Minister for Foreign Affairs
• The Hon Tony Burke MP, Minister for Agriculture, Fisheries and Forestry

2006

• The Hon Alexander Downer MP, Minister for Foreign Affairs

2005

• Senator the Hon Paul Calvert, President of the Senate
• Senator the Hon Amanda Vanstone, Minister for Immigration and Multicultural and Indigenous Affairs

2003

• The Hon Neil Andrew, Speaker of the House of Representatives

2002

• The Hon John Howard, MP, Prime Minister

To Australia

2009

• Ms Stefania Craxi, Undersecretary of State for Foreign Affairs
• Mr Adolfo Urso, Vice Minister for Trade

2006

• Senator Danieli, Deputy Foreign Minister for Italians Abroad

2005

• Senator Andrea Pastore, President of the Constitutional Affairs Committee

2003

• Italian Parliamentary delegation

2002

• Ms Margherita Boniver, Undersecretary of State for Foreign Affairs,

2001

• Mr Lamberto Dini, Minister for Foreign Affairs

Bilateral economic and trade relationship

Italy is the world’s seventh largest economy and a significant market for Australia. It is our fifth largest export market in the European Union (EU). Italy is ranked fourteenth overall as a trading partner for Australia. Australia is Italy’s fifteenth largest export market outside the EU and thirtieth trading partner overall (ISTAT figures).

Italian investment in Australia is relatively weak, reflecting Italy’s generally low (FDI abroad, most of which is directed within the EU and Mediterranean area. There is, however, growing interest in Australia as a base for expansion into Asia. Total stock of FDI from Italian companies in Australia is around AUD$500 million, making Italy the fifteenth largest direct investor in Australia.

The main Italian companies with investments in Australia are Parmalat (dairy product manufacturers), Ferrero (confectionery), Iveco Trucks (motor vehicle manufacture and service), Luxottica (eyewear), and Permasteelisa (construction, aluminium, glass). ENI, the Italian energy producer, is also active in offshore gas and oil exploration in Australia, often in partnership with other companies. In 2009 both Parmalat and Luxottica increased their investment in Australia.

Trade successes

Major Australian investments in Italy include Po Valley Energy, which has bought gas exploration and production licences in Northern Italy, and NewsCorp which wholly owns Italy’s leading satellite TV company, SKY Italia. Cochlear, C3, Cleanseas and ERG are other Australian companies doing business in Italy. A number of other Australian companies, such as Dyesol, are starting to invest in the energy sector in Italy which offers opportunities in both traditional energy sources and renewables, while others, such as the Macquarie Group, have invested in Italian infrastructure and real estate projects.

Export opportunities

Two-way merchandise trade in 2008 totalled A$ 7 billion. Australian exports to Italy in 2008 totalled A$ 1.7 billion, slightly up on the previous year. Imports from Italy in 2008 totalled A$5.3 billion, up 10 per cent on 2007.

Commodities such as coal, wool, wheat, nickel, zinc, iron ore, leather and hides and skins dominate the mix of Australian exports, generally making up over 80 per cent of total Australian exports. Non-traditional exports such as fast ferries, motor vehicle parts, processed food, wine, medicaments and defence materiel are growing. Italian imports are highly diversified and dominated by specialised manufactures. Major Australian imports from Italy in 2008 included medicaments, chemical compounds, cars, and specialised machinery.

The Australian Trade Commission (Austrade) is the Australian Government's trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.  Austrade’s Opportunities Online website is a valuable starting point for information on export opportunities to many countries, including Italy. Austrade maintains an office in Milan. For further information please contact Austrade on 13 28 78 or e-mail info@austrade.gov.au

In addition, Australian Wool Innovation Ltd has opened an office in Treviso in northern Italy to support its Western Europe market (Italy continues to be the world's second largest wool processor and manufacturer of woollen clothing after China).

TradeWatch Contacts

If you would like more information on the trade and economic conditions in Italy, please e-mail the Department of Foreign Affairs and Trade.

Updated:  September 2009