The campaign, entitled 'No Leave, No Life', aims to encourage Australia's 11m workers to use up the 121m days of paid leave they have been hoarding, which is worth a reported A$31bn (£13.6bn).
Australia's government hopes the campaign will breath life into its tourism and hospitality industries, which have been suffering in recent times due to the strong Australian dollar, keeping foreign visitors away and encouraging Aussies to travel abroad.
However, the dollar has fallen from close to parity with the US dollar in July to $0.65 this week and the government hopes this will persuade Australians to holiday at home.
Martin Ferguson, Australia's tourism minister, said tourism officials would hold meetings with major employer groups next week to kickstart the campaign.
Ferguson is leading the push to force businesses to make sure employees take their accrued holidays.
He said: "It is good for business, good for employees and potentially good for our tourism industry as it faces some tough times because of the global financial crisis."
Research found that many Australian full-time workers, who are entitled to a minimum four weeks annual leave and 10 public holidays each year, were not taking their full entitlement for fear of losing their jobs or falling behind on work.
The holiday campaign comes after official data found Australia's economy grew by just 0.1% in the third quarter, its slowest rate for more than seven years.
It follows the launch of Tourism Australia's £19.5m international campaign, urging foreigners to escape the rat race at home and unwind in Australia.
The campaign was launched on the back of Baz Luhrmann's new film 'Australia', starring Nicole Kidman and Hugh Jackman.
Australia's tourism industry is worth about A$40bn a year, or equivalent to 4% of gross domestic product, supporting about 500,000 jobs. Tourists from overseas account for about 25% of the industry.