The appointment comes in the run-up to the Rugby World Cup, taking place in Australia from October 9, when the world's eyes will once again be on the country.
It is the first major event in Australia since the 2000 Olympics, which provided a tremendous boost for its tourism industry.
Davies' role has been created as part of a plan by Australia's tourism minister, Joe Hockey, to move beyond the country's 'shrimp on the barbie' image.
The Australian Tourist Commission (ATC) wants to attract more upmarket tourists, particularly couples who take high-spending two-week holidays, rather than low-spending backpackers.
Davies has been the ATC's marketing director, Europe, since January 2002.
He takes on the new role at the start of November as the Rugby World Cup comes to a close.
The ATC in London says it has already begun seeking a replacement for Davies, who managed a £4m pan-European advertising budget through Delaney Lund Knox Warren.
Davies will now begin a five- to ten-year plan to overhaul Australia's image and create double-digit growth in the number of tourists visiting the country.
His remit includes responsibility for global research programmes and international media relations.
During his time at the ATC, the former British Airways and Qantas brand manager has overseen major advertising and PR initiatives, including Australia's first TV ad campaign in the UK for three years.
The commercials, which featured a soundtrack from the Manic Street Preachers, ran earlier this year and will go on air again in the run-up to the Rugby World Cup.
Australia's tourism performance was badly hit by the SARS outbreak in Asia in the spring, with tourism growth only 2.5% from January to June.
However, Davies forecasts overall growth could hit 10% this year due to the Rugby World Cup effect.