Native English speakers sometimes mix up Austria and Australia
([example](http://www.dailymail.co.uk/news/article-3474132/Whoops-CNN-
mercilessly-mocked-online-mixes-Austria-Australia.html)).

Do native Japanese speakers sometimes mix up "オーストリア" and "オーストラリア"?
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loanwords
Do native Japanese speakers confuse "オーストリア" and "オーストラリア"
Any Japanese who knows Austria and Australia are different countries wouldn't
confuse them. We pronounce Austria as オーストリア, オーストリヤ, or オーストリー (elder
genaration tends to call this way. Conversly younger generation calls Italy as
イタリー、while elder genaration tends to call it イタリヤ), and Australia as オーストラリア
with a clear vocal distinction.
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Yes, many people do. The katakana transcriptions of them are based on English,
and so they sound.

There are other confusing country names in Japanese such as アルバニア{Albania} and
アルメニア{Armenia}, アイルランド{Ireland} and アイスランド{Iceland}, or ウルグアイ{Uruguay} and
パラグアイ{Paraguay}, but this one is especially infamous because both countries
are well-known ones and likely to be on everybody's lips including those
who're not particularly into geography.

If you write them in kanji, European Austria is 墺【おう】 and Oceanian Australia
is 豪【ごう】 (濠) so there's no confusion. But the problem is Austrian 墺 is
relatively less known and if you explain that it means "Austria", the chaos
starts over again.

* * *

Further reading: [Runaway 'kangaroo' spotted in Austrian
garden](http://www.thelocal.at/20150128/runaway-kangaroo-spotted-in-austrian-
garden)
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It can happen in Japanese just like it can happen in English.
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