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Q. Why Australia is called Oz?

Based on a popular and informal abbreviation of its name, Australia is often called "Oz." The use of the term "Oz" goes back at least as far as how Australians pronounce their country's English name with an accent. In the Australian accent, an abbreviated colloquial form of Australia is still heard: " Oz-tralia. "
This informal term spread its influence far beyond Australia itself and even became an international catchword. In common parlance and popular culture, the name has become a well-known nickname for the country. The origin of the term is somewhat obscure, but it seems to have become a colloquialism on its own through the natural flow and maturing process. 
The relationship between Australia and Oz is also reinforced by the abbreviation, which appears in a large number of dedicated Australian programs. The iconic film The Wizard of Oz contributed to even broader popularization. Its novel, The Wizard of Oz movie, set in the land of Oz, is perhaps one reason why Australia has stuck since then.
Though the name is not used as an official or formal appellation, it has become a warm and endearing term for Australia by which people can express their affection. It captures the easy-going, casual nature of an Australian culture that frequently uses slang. Australians often use the term itself as a symbol of national identity and fellowship. 
The end result is that when you speak in proper Australian English, the colloquial pronunciation of Australia's name sounds enough like Oz to be a natural lead-in, morphing into an informal nickname from there. With this lovable term now used even outside Australia, the country's cultural uniqueness is only strengthened.

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