The decision is part of a strategy to boost Australia's appeal to upmarket holidaymakers. The Australian government is to invest £53m in tourism over the next four years.
The ATC has also briefed Grey sister agency Joshua Integrated to develop its web strategy, including creating a website to reflect the ATC's upmarket positioning.
Grey will be responsible for creating advertising across all media, including a TV campaign for 2005. A TV ad being shown in the UK, created by Whybin\ TBWA in Australia, will run until the end of the year.
About 650,000 Britons visited Australia last year, but total numbers fell by 3% year on year.
Grey fought off TBWA\London, McCann-Erickson and Mustoes for the business, previously handled by Delaney Lund Knox Warren, which did not repitch.
The pitch was handled by The Haystack Group.