The European Union is keen to agree on a trade pact with Australia as soon as possible, European Council President Donald Tusk has said after talks with Prime Minister Malcolm Turnbull.
Both sides agreed to speed up negotiations, which started at the end of 2015. The project has been assigned a high priority, said the two politicians.
The agreement on the sidelines of the G20 summit in Hamburg is a further sign that US President Donald Trump is leading his country into trade isolation, say observers.
Until now, Australia had backed the Trans-Pacific Partnership (TPP) which was agreed between the US and 10 other partner countries under former US president Barack Obama. Trump withdrew from that pact in January.
The EU had planned to ink a free trade zone with the US - known as the Transatlantic Trade and Investment Partnership (TTIP) - but hopes of achieving progress on the agreement have faded since Trump took office.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Trump has been critical of the free trade agreements currently on the table, saying they put the United States at a disadvantage.
The EU also agreed on the outline of a free trade deal with Japan on Thursday, just before G20 got under way.
