Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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ABERDEEN AUSTRALIA EQUITY FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[IAF LOGO]

Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
(800) 451-6788

January __, 2003

Dear Stockholder:

The Annual Meeting of Stockholders is to be held at 9:30 a.m. (Eastern time), on Thursday, March 20, 2003 at Dryden Hall, 7^th Floor, Plaza Building, 751 Broad Street, Newark, New Jersey. A Proxy Statement regarding the meeting, a WHITE proxy card for your vote at the meeting, and an envelope, postage pre-paid, in which to return your WHITE proxy card are enclosed.

At the Annual Meeting, the Fund's stockholders will vote for the election of the Fund's Class III Directors for three-year terms and until their successors are duly elected and qualify, and will be asked to vote on proposals: (a) to amend the Fund's charter to increase the number of authorized shares, to authorize an undesignated class of preferred stock, and to authorize the Board of Directors to classify and reclassify the preferred stock into one or more classes or series of preferred stock or common stock, (b) to give the Fund broader borrowing authority, and (c) to amend the Fund's Management Agreement and Investment Advisory Agreement to provide that fees paid under those agreements will be based on managed assets attributable to both its common stock and any senior securities. Stockholders will also vote upon a stockholder proposal set forth in the Proxy Statement, if properly presented. Stockholders who are present at the meeting will hear a report on the Fund and will be given the opportunity to discuss matters of interest to you as a stockholder.

Your Directors recommend that you vote FOR each of the proposed Class III Director nominees; the charter amendment to authorize a preferred class of stock; the expansion of the Fund's borrowing authority; and the proposed changes to the Management Agreement and Investment Advisory Agreement. Your Directors recommend that you vote AGAINST the stockholder proposal set forth in the Proxy Statement.

As more fully discussed in the Proxy Statement, the Fund has received notice from Bankgesellschaft Berlin AG, a holder of the Fund's common stock (the "Dissident Stockholder"), that the Dissident Stockholder intends to submit several proposals at the meeting. The Fund believes that the Dissident Stockholder will distribute its own proxy solicitation materials to stockholders. The Fund's Board of Directors has considered each of the Dissident Stockholder's proposals, and believes that these proposals are not in the best interests of the Fund and all stockholders. The Fund's Board of Directors unanimously recommends that stockholders vote AGAINST all proposals submitted by the Dissident Stockholder at the Meeting. The Fund's Board of Directors urges stockholders to reject any solicitation by the Dissident Stockholder. DO NOT SIGN ANY PROXY CARD BANKGESELLSCHAFT BERLIN AG MAY SEND YOU.

ABERDEEN AUSTRALIA EQUITY FUND, INC.

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* Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Global Income Fund, Inc. have a common Investment Manager and Investment Adviser with the Fund, and may thus be deemed to be part of the same "Fund Complex" as the Fund.

** Mr. Freedman is deemed to be an interested person because of his ownership of securities of Aberdeen Asset Management PLC, the parent company of the Fund's Investment Manager and Investment Adviser. Mr. Young is deemed to be an interested person because of his affiliation with the Fund's Investment Manager and Investment Adviser.

Messrs. Elsum, Miles and Potter are members of the Contract Review Committee.

Messrs. Aaronson, Sacks and Sheehy are members of the Audit and Valuation Committee.

Messrs. Miles, Potter and Sheehy are members of the Nominating Committee.

Effective September 12, 2002, Mr. Sacks was redesignated as a Class II Director. Prior to that time, he had been a Class I Director.

Please also see the information contained below under the heading "Further Information Regarding Directors and Officers."

The Board of Directors is seeking stockholder approval to amend the Fund's charter (the "charter") to increase the number of authorized shares, to authorize an undesignated class of preferred stock, and to authorize the Board of Directors to classify or reclassify the preferred stock into one or more classes or series of preferred stock or common stock.. The Board of Directors, in a unanimous vote, has determined that, depending upon market conditions, it may be beneficial to the Fund to leverage its assets through the issuance of preferred stock or debt obligations. The Board of Directors believes that current interest rates are at an historically low level and, if the Fund were able to leverage its assets in a low interest rate environment, returns to Fund stockholders could be enhanced. To provide the Fund with the flexibility to borrow either by issuing preferred stock or debt obligations, the Board of Directors seeks authority to establish and issue a class of preferred stock. Proposal 3, below, would provide the Fund with the flexibility to borrow by issuing debt obligations. The Board of Directors could designate the terms of and issue preferred stock, common stock or debt obligations, without further stockholder approval, once the charter is amended and the fundamental policy which currently restricts the Fund's capacity to borrow is also amended (see Proposal 3, below).

The Board of Directors believes that the issuance of one or more series of preferred stock would be in the best interests of the Fund and the holders of the Fund's common stock if preferred stock could be issued in a favorable interest rate environment. The Board of Directors believes that the Fund can, over time, earn an incremental return for the holders of the common stock from the assets acquired with the proceeds of the preferred stock, which return would exceed the costs of issuing and servicing the preferred stock. There can, of course, be no assurance that the Fund will be able to earn an incremental return for the holders of the common stock from assets attributable to an issuance of preferred stock.

If Proposals 2 and 3 are approved, the Fund may issue preferred stock, debt obligations, or a combination of these types of securities. The particular type(s) of securities that may be issued would be dependent upon the market conditions at the time of issuance, and the Board of Directors would determine the specific terms, conditions and restrictions of any issued security, including, without limitation, dates of issuance and maturity, amounts payable upon redemption or liquidation, voting rights, dividend or interest rates, dividend or interest payment dates, and conversion prices, without further action on the part of the common stockholders. However, there can be no assurance that any such senior securities will be issued.

It is the intention of the Board of Directors to seek to have any such preferred shares or debt obligations rated, at the highest possible credit rating level, by a nationally recognized statistical rating organization. There can, however, be no assurance that such credit ratings will be obtained. In addition, obtaining such credit ratings will involve costs to the Fund and may require that the Fund agree to various financial and operating restraints as a condition of such credit ratings.

The amount of preferred shares or debt obligations, if any, to be issued is not known at this time, and the Board of Directors will make such determination at the time of issuance based upon then-current market conditions, the asset coverage requirements of the 1940 Act, the credit rating awarded to such securities, and any conditions or requirements established by the rating agencies. Holders of senior securities would have a claim to the Fund's assets prior to any claim by the holders of the common stock, and such senior securities would be repaid prior to the common stock in the event of liquidation of the Fund. If issued, preferred stock could be placed privately or sold in the public marketplace. If the Board of Director's decision is to make a public offering and have the preferred stock traded on an exchange, the necessary actions would be taken to register such shares with the U. S. Securities and Exchange Commission ("SEC") and to list such shares on a stock exchange.

General. Under the 1940 Act, immediately after the issuance of preferred shares the value of the Fund's assets, less all liabilities and indebtedness not represented by senior securities (including private or temporary borrowings), would have to equal at least 200% of (i) the aggregate amount of all senior securities representing indebtedness, plus (ii) the aggregate involuntary liquidation preference of any shares (such as the preferred shares) having priority as to distribution of assets or payment of dividends over any other shares.

Voting Rights. The 1940 Act requires that the holders of any preferred shares, voting separately as a single class, have the right to elect at least two Directors at all times, and, subject to the prior rights, if any, of the holders of any other class of senior securities outstanding, to elect a majority of the Directors at any time two years' dividends on the preferred shares are unpaid. In addition to any approval by stockholders that might otherwise be required, the approval of the holders of a majority of any outstanding preferred shares, voting separately as a class, is required to (i) adopt any plan of reorganization that would adversely affect the preferred shares and (ii) take any action requiring a vote of security holders pursuant to Section 13(a) of the 1940 Act, including, among other things, changes in the Fund's sub-classification as a closed-end investment company, changes in the classification of the Fund from a diversified investment company or changes in its fundamental investment policies and restrictions.

Dividend and Liquidation Preference. Holders of preferred shares would be entitled to receive dividends before holders of common shares. Holders of preferred shares would also be entitled to receive the liquidation value (the amount the Fund must pay to preferred stockholders if the Fund is liquidated) of their shares before any distributions are made to holders of common shares should the Fund ever be dissolved. The 1940 Act requires that (i) dividends payable on preferred shares be cumulative and (ii) the Fund may not pay or declare dividends (except a dividend payable in shares of the Fund) or other distributions on the common shares, or purchase any of its common shares, unless the 1940 Act asset coverage test, described above, is met, after giving effect to the dividend, distribution or purchase.

Leverage. The issuance of preferred shares would create leverage that would affect the amount of income available for distribution on the Fund's common shares as well as the net asset value of the common shares. It is expected that the initial dividend rate or rates that would be paid on any class or series of preferred shares would be determined at the time of issuance and would depend on various factors, including market conditions prevailing at the time. If the investment performance of the capital represented by the preferred shares fails to cover the dividends payable thereon, the total return on the Fund's common stock would be less or, in the case of negative returns, would result in higher negative returns to a greater extent than would otherwise be the case. The requirement to pay dividends on the preferred stock in full before any dividends may be paid on the common stock means that dividends on the common stock from earnings may be reduced or eliminated.

Voting Rights. The voting rights of the holders of the outstanding common shares would be affected by the issuance of any preferred shares because the holders of any preferred shares would have certain class voting rights as described above under "Description of Preferred Shares - Voting Rights." Voting rights in the Fund are non-cumulative.

Other Considerations. The class voting requirements of the preferred shares and the representation of the preferred shares on the Board of Directors could make it more difficult for the Fund to engage in certain types of transactions that might be proposed by the Board of Directors and/or holders of common shares, such as a merger, sale of assets, exchange of securities, liquidation of the Fund or conversion to an open-end fund. Holders of preferred shares might have interests that differ from holders of common shares, and there can be no assurance that holders of preferred shares will vote to approve transactions approved by holders of the common shares. The flexibility to issue preferred shares as well as common shares could enhance the Board of Directors' ability to negotiate on behalf of the stockholders in a takeover, but might also render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by the holder of a large block of the Fund's securities and the removal of incumbent management.

See Appendix A for the form of the proposed charter amendment.

The Fund's current fundamental investment restrictions do not permit the Fund to:

To complement the proposed charter amendment described in Proposal 2, above, the Fund seeks the approval of stockholders to amend the Fund's borrowing restriction to give the Fund the flexibility to issue senior securities in the form of debt instruments, as well as broader borrowing powers generally. The 1940 Act permits broader borrowing authority to closed-end funds, such as the Fund, than to open-end or "mutual" funds. The Fund's current investment restrictions do not permit it to take full advantage of the range of borrowing and leveraging opportunities that the 1940 Act permits and that many other closed-end funds utilize. For example, two other closed-end funds managed by the Fund's Investment Manager and Investment Adviser have and utilize the broad powers available under the 1940 Act. The immediate impetus for seeking broader borrowing authority for the Fund is to permit the Fund to have the flexibility to issue senior securities in the form of debt. However, the proposed new borrowing policy would provide the Fund with the full borrowing power available under the 1940 Act. The 1940 Act provides that a fund's borrowing powers are a matter of fundamental policy and, therefore, cannot be changed without a 1940 Act Majority Vote. Although the Fund has no immediate plans to use this broader borrowing authority for purposes other than those described in Proposal 2, Fund management believes that in seeking broader borrowing power, it is desirable to ask stockholders to approve a policy that provides the maximum flexibility available under law. This will obviate the need for the Fund to seek stockholder approval every time it wishes to engage in another legally permissible form of borrowing. Thus, the Fund's proposed new policy on borrowing, which stockholders are asked to approve, would provide that:

The Fund may not:

The Fund's current Management Agreement and Investment Advisory Agreement ("Agreements"), each dated December 22, 2000, were approved by the Fund's stockholders at a meeting held November 30, 2000. This approval was sought when the Fund's Investment Manager and its Investment Adviser were acquired by Aberdeen Asset Management PLC ("Aberdeen"). Continuation of each of the Agreements was most recently approved unanimously by the Fund's Board of Directors, and by the Fund's Independent Directors voting separately, at a meeting held December 11, 2002. In connection with the decision of the Board of Directors to seek stockholder approval for amendments to the Fund's charter to authorize a preferred class of equity securities and to give the Fund broader borrowing authority (see Proposals 2 and 3), it was determined that, as currently formulated, the language for calculating the fees paid by the Fund to the Investment Manager, and by the Investment Manager to the Investment Adviser, might not be broad enough to permit those fees to be based on all the Fund's assets under management by the Investment Manager and Investment Adviser. The current fee formulation provides that fees shall be based on the Fund's "net assets." This term would not normally include proceeds of borrowings, even when the proceeds are used for investment purposes. Also, under regulatory interpretations applicable to preparation of the Fund's financial statements, the term "net assets" would not include assets attributable to senior securities that might be redeemed upon an event not under the control of the Fund. These interpretations are intended to clarify that securities of that type should not be included in a company's financial statements as permanent equity. Although these interpretations do shape the general understanding of the term "net assets," they do not address the method for calculating fees in contracts such as the Agreements and they do not require that a fund compute its fees on the basis of a fund's "net assets," as that term is currently understood.

In considering this matter, the Board of Directors noted that the proceeds of any borrowings used for investment purposes, as well as the proceeds from the issuance of senior securities, would increase the amount of Fund assets for which the Investment Manager and Investment Adviser would be expected to provide services to the Fund. In addition to being attentive to the various technical concerns in dealing with senior securities and borrowings, the Board of Directors noted that the Investment Manager and Investment Adviser would be responsible for identifying additional investment opportunities for the proceeds of these borrowings and securities offerings and for managing the additional investments. The Board of Directors also determined that the original formulation of the fee language in the Agreements was designed to compensate the Investment Manager and Investment Adviser on the basis of the amount of assets as to which they make investment decisions. The Board of Directors noted that it had determined to seek stockholder approval to permit the Fund to issue senior securities and to broaden the Fund's authority to borrow. Both these actions had been determined to be in the best interests of the Fund and the Fund's stockholders. (See Proposals 2 and 3.) In the view of the Board of Directors, it would not be appropriate to take actions that increase assets which the Investment Manager and Investment Adviser are obliged by the Agreements to manage without providing proportional additional compensation. The Board of Directors, including the Independent Directors voting separately, unanimously determined to recommend that stockholders approve a change in the fee calculation provision of each Agreement to clarify that fees to the Investment Manager and Investment Adviser will be based on all assets under management, including the proceeds of any borrowing used for investment and the proceeds of any issuance of senior securities.

The current fee language in each of the Agreements is as follows:

The Fund will pay the Investment Manager a fee at the annual rate of 1.10% of the Fund's average weekly net assets up to $50 million, 0.90% of such assets between $50 million and $100 million and 0.70% of such assets in excess of $100 million, computed based upon net asset value at the end of each week and payable at the end of each calendar month.

If the proposed change in the fee language of the Agreements had been in effect during the Fund's most recently completed fiscal year, there would have been no change in the fees paid by the Fund to the Investment Manager or in fees paid by the Investment Manager to the Investment Adviser. There will be no change in the fees payable to either the Investment Manager or the Investment Adviser unless or until action is taken that increases the Fund's assets under management either through borrowing or through the issuance of senior securities, and the Board of Directors at an in-person meeting approves the proposed amendments to the Agreements. The net impact on fees would depend on the net increase in Fund assets that would result from those activities, which cannot now be predicted. In accordance with the terms of the Agreements, the Fund only pays a fee to the Investment Manager. As the amount of the Fund's net assets increases, the rate of the fee under the Management Agreement is reduced. As indicated above, the terms of the current Management Agreement, and the terms of the proposed amendment to the Management Agreement, provide for breakpoints at higher asset levels, so that the rate of the fee to be paid to the Investment Manager is 1.10% of the Fund's average weekly net assets up to $50 million, 0.90% of such assets between $50 million and $100 million, and 0.70% of such assets in excess of $100 million. Because of these breakpoints, an increase in total assets under management would tend to reduce the fee paid by the Fund under the Management Agreement as a total percentage of Fund assets.

It is not proposed that any other provisions in the Agreements be changed. The terms of each Agreement, other than the fee provisions described above, are described generally as follows:

The Management Agreement provides that the Investment Manager will manage the Fund's investments and make investment decisions for the Fund in accordance with the Fund's investment objective, policies and limitations. The Investment Manager will also select brokers and dealers to effect the Fund's portfolio transactions. The Management Agreement authorizes the Investment Manager, at its own expense, to retain others to assist in performing its obligations, subject to compliance with applicable legal requirements.

The Management Agreement also provides that the Investment Manager agrees to pay the salaries and expenses of all of its personnel and all expenses incurred by it arising out of its duties under the Management Agreement. The Fund bears its own expenses, as specified in the Management Agreement. In addition, certain expenses incurred by the Investment Manager's employees who serve as officers and directors of the Fund may be reimbursed by the Fund under the Fund's policy governing reimbursement of Fund-related expenses. In return for the services provided by the Investment Manager to the Fund, the Fund pays the Investment Manager fees at the following annual rates, computed on the basis of the Fund's net asset value at the end of each week and payable at the end of each calendar month: 1.10% of average weekly net assets up to $50 million, 0.90% of such net assets between $50 million and $100 million, and 0.70% of such net assets in excess of $100 million. Proposal 4(A), above, seeks to expand this fee provision so that it would apply to all the Fund's assets under management.

The Management Agreement had an initial term of two years, with continuation thereafter subject to yearly approval by the Board of Directors or Fund stockholders, as well as by the Fund's Independent Directors. The Management Agreement may be terminated at any time, without payment of penalty, on 60 days' written notice by the Board of Directors or by vote of holders of a majority of the outstanding voting securities of the Fund, or by the Investment Manager upon 90 days' written notice. The Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act).

The Management Agreement provides that the Investment Manager is not liable for any error of judgment or any loss suffered by the Fund, in connection with matters to which the Management Agreement relates, except a loss resulting from breach of fiduciary duty with respect to the receipt of compensation (subject to applicable legal limits) or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Manager in the performance of its duties or from reckless disregard by the Investment Manager of its obligations and duties under the Management Agreement.

The Management Agreement provides that the Investment Manager and its affiliates may provide similar services to other funds and clients and may engage in other activities. It also provides that investment opportunities shall be allocated among the Fund and other clients in a fair and equitable manner.

During the fiscal year ended October 31, 2002, the fees paid to the Investment Manager by the Fund amounted to US$ 1,099,493.

The Investment Advisory Agreement provides that the Investment Adviser will make recommendations to the Investment Manager as to specific portfolio securities to be purchased, retained or sold by the Fund and that the Investment Adviser will obtain related research and statistical data. The Investment Adviser's recommendations are limited to securities denominated in Australian or New Zealand dollars.

For these services, the Investment Adviser receives the following fees from the Investment Manager, calculated on the basis of the Fund's assets at the end of each week and paid at the end of each calendar month: 0.30% of such net assets up to $50 million, 0.25% of such net assets between $50 million and $100 million, and 0.15% of such net assets in excess of $100 million. Proposal 4(B), above, seeks to expand this fee provision so that it would apply to all the Fund's assets under management.

The Investment Advisory Agreement also provides that the Investment Adviser agrees to pay the salaries and expenses of all of its personnel and all expenses incurred by it arising out of its duties under the Investment Advisory Agreement. However, certain expenses incurred by the Investment Adviser's employees who serve as officers and directors of the Fund may be reimbursed by that Fund under the Fund's policy governing reimbursement of Fund-related expenses.

During the fiscal year ended October 31, 2002, the fees paid to the Investment Adviser by the Investment Manager in respect to the Fund amounted to US$ 296,320.

The provisions of the Investment Advisory Agreement regarding liability, non-exclusivity of services, allocation of investment opportunities, duration and termination are comparable to those of the Management Agreement.

Aberdeen Asset Managers (C.I.) Limited serves as Investment Manager to the Fund and Aberdeen Asset Management Limited serves as Investment Adviser to the Fund pursuant to a Management Agreement dated December 22, 2000 and an Investment Advisory Agreement dated December 22, 2000, respectively. The Investment Manager is a Jersey, Channel Islands corporation organized in October 1985 with its registered office located at 17 Bond Street, St. Helier, Jersey, Channel Islands. The Investment Adviser is a wholly-owned subsidiary of Aberdeen Asset Management Holdings Limited ("AAMHL"), an Australian corporation. The registered offices of the Investment Adviser and AAMHL are located at Level 6, 201 Kent Street, Sydney, N.S.W., Australia. Both the Investment Manager and AAMHL are wholly-owned subsidiaries of Aberdeen Asset Management PLC, a United Kingdom corporation. The registered offices of Aberdeen Asset Management PLC are located at One Albyn Place, Aberdeen, Scotland AB10 1YG.

Continuation of each of the Agreements was most recently approved unanimously by the Fund's Board of Directors, and by the Fund's Independent Directors voting separately, at a meeting held December 11, 2002. The Investment Manager and Investment Adviser prepared and submitted to the Contract Review Committee of the Board of Directors ("Committee") and to the Board of Directors, for consideration at their respective meetings held on December 11, 2002, a detailed report pursuant to the provisions of Section 15(c) of the 1940 Act (the "Report"). In the Report, the Investment Manager and Investment Adviser provided information with respect to regulatory matters, compliance with applicable law and with the Fund's investment objectives and policies and restrictions, performance of the Fund, portfolio composition, and investment practices and techniques. The Report discussed the investment advisory fees paid to the Investment Manager and Investment Adviser, and compared those fees to fees paid with respect to comparable funds. The Report also provided an analysis of the Fund's expenses, and a comparison of those expenses to expenses of comparable funds. The Report contained a description of the personnel and services provided to the Fund by the Investment Manager and Investment Adviser, and a cost analysis for the provision of services. A representative of the Aberdeen Group also made a presentation to the Committee, which included information regarding the Aberdeen Group's financial and operational highlights and key issues affecting the Group. The members of the Committee had the opportunity to confer with the Investment Manager and Investment Adviser, as well as with counsel to the Independent Directors. After review and consideration of the materials presented, the Committee determined to recommend to the Board of Directors that the Agreements be renewed for a further year. At the meeting of the Board of Directors, the Directors discussed the Report with representatives of the Investment Manager and Investment Adviser, as well as with the members of the Committee. The Board of Directors had the opportunity to confer with counsel to the Independent Directors. The Board of Directors, and the Independent Directors voting separately, thereupon approved the renewal of the Agreements.

Information concerning the principal executive officer and directors of the Investment Manager and the Investment Adviser is as follows:

During its fiscal year ended October 31, 2002, the Fund paid fees totaling approximately $60,000 to Aberdeen Fund Managers Inc. (doing business under the name Aberdeen Asset Management Inc.) ("AFMI"), for investor relations services pursuant to an Investor Relations Services Agreement. AFMI is an affiliate of the Investment Manager and the Investment Adviser. AFMI will continue to provide investor relations services to the Fund after approval of the amendments to the Management Agreement and Investment Advisory Agreement.

Walter S. Baer, 344 S. Canyon Drive, Los Angeles, CA 90049, has submitted the following proposal for inclusion in this Proxy Statement. Such stockholder claims that he has owned shares of the Fund with a market value of at least $2,000 continuously for at least one year and intends to hold these shares continuously until the next stockholders' meeting. The Board of Directors and the Fund accept no responsibility for the accuracy of either the proposal or the stockholder's supporting statement. The full text of the stockholder's proposal follows below.

RESOLVED: The shareholders of Aberdeen Australia Equity Fund, Inc. ("Fund") ask the Board of Directors to take the steps necessary to convert the Fund to an open-end fund or otherwise permit shareholders to realize net asset value (NAV) for their shares.

SUPPORTING STATEMENT: Shares of our Fund have persistently traded at a double-digit discount from net asset value. As of September 17, 2002 (the date this proposal was submitted), the discount was more than 15 percent, which represents more than $17 million in value unavailable to shareholders.

This proposal asks the Fund's board of Directors to enhance shareholder value by converting the Fund to an open-end fund or taking other action to permit shareholders to realize NAV. A closed-end structure may have been appropriate when the Fund began operations in 1985, but I believe it is no longer necessary or beneficial to shareholders. The Fund is large enough to be viable as an open-end fund, and it is invested in securities with ample liquidity to handle share purchases and redemptions in an open-end structure.

The Fund may recite a well-known litany of objections to open-ending and cite industry-paid-for studies supporting the status quo. However, I believe that the closed-end structure of our Fund unnecessarily diminishes shareholder value, and that the benefits to shareholders of open-ending vastly outweigh the risks and costs of conversion.

The Fund was organized as a closed-end fund to provide investors a vehicle for the principal investment objective of long-term capital appreciation through investment primarily in equity securities of Australian companies listed on the Australian Stock Exchange. Its secondary objective is current income.

The Fund's Directors are convinced that an open-end structure is not a good way to build stockholder value through long-term investment in Australian equities. This is so because, among other things, as a closed-end fund, the Fund does not need to retain high levels of non-productive cash and other short-term investments in order to meet anticipated redemptions. In addition, the closed-end structure provides more flexibility to the Fund to invest, when appropriate, in less liquid stocks which may afford better long-term capital gains potential than investments in companies with larger capitalization. Further, redemption of Fund shares would shrink the Fund's asset base and would thus tend to increase the Fund's expense ratio -- that is, the Fund's overall expenses, divided by the number of shares outstanding. To the extent the Fund's expense ratio increases, returns to stockholders may be reduced. Your Directors do not believe it would be possible to prevent an increase in the expense ratio resulting from redemptions by selling additional Fund shares because, as noted below, there is no current adequate distribution channel for the Fund's shares.

To assure that an open-end fund has long-term viability, there needs to be a mechanism through which the Fund may attract new investors. No such distribution channel is currently maintained by the Fund's Investment Manager. Therefore, there would be significant costs associated with the Fund developing an appropriate distribution channel and those costs would likely be passed on to stockholders. Moreover, there can be no assurance that such a distribution channel could be established.

In conclusion, attempts to deliver net asset value immediately to a portion of the stockholders who wish to exit the Fund may well destroy or diminish the advantages otherwise enjoyed by the remaining stockholders. The Board of Directors remains unanimously committed to realizing the potential of the Fund as a closed-end fund.

The names of the officers of the Fund who are not Directors, their addresses, ages and principal occupations during the past five years are provided in the table below:

_____________________________

* The named officer holds the same position(s) with Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Global Income Fund, Inc., both of which may be deemed to be a part of the same "Fund Complex" as the Fund.

** Officers hold their positions with the Fund until a successor has been duly elected and qualified. Officers are generally elected annually at the meeting of the Board of Directors next following the annual meeting of stockholders. The officers were last elected on June 19, 2002.

As of December 31, 2002, the Fund's Directors and executive officers, as a group, owned less than 1% of the Fund's outstanding shares of common stock. The information as to ownership of securities which appears below is based on statements furnished to the Fund by its Directors and executive officers.

As of December 31, 2002, the dollar range of equity securities owned beneficially by each Director in the Fund and in any registered investment companies overseen by the Director within the same family of investment companies as the Fund was as follows:

_____________________________

* Aggregate Dollar Range shown includes equity securities of the Fund, and of Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Global Income Fund, Inc., both of which have a common Investment Manager and Investment Adviser with the Fund, but which do not hold themselves out to investors as related companies to the Fund for purposes of investment and investor services.

Messrs. Hugh Young and Christian Pittard serve as executive officers of the Fund. As of December 31, 2002, Mr. Pittard owned no shares of the Fund's common stock.

The Board of Directors has a standing Audit and Valuation Committee, composed entirely of Independent Directors. Each member is also "independent" within the meaning of the American Stock Exchange ("AMEX") listing standards. The Audit and Valuation Committee pre-approves and reviews both the audit and non-audit work of the Fund's independent accountants, submits recommendations to the Board of Directors as to the selection of independent accountants and reviews compliance of the Fund with regulations of the SEC and the Internal Revenue Service, and other related matters.

The Board of Directors has adopted an Audit Charter and a Valuation Charter for its Audit and Valuation Committee. A copy of the Fund's Audit Charter is attached to this Proxy Statement as Appendix B. The Audit and Valuation Committee has received the written disclosures and the letter required by Independence Standards Board Standard No. 1 from PricewaterhouseCoopers LLP ("PwC"), the Fund's independent accountants, and has discussed with PwC its independence. The Audit and Valuation Committee has also reviewed and discussed the audited financial statements with Fund management and PwC, and discussed certain matters with PwC required to be discussed by Statement on Auditing Standards No. 61. Based on the foregoing, the Audit and Valuation Committee recommended to the Board of Directors that the Fund's audited financial statements be included in the Fund's Annual Report to Stockholders for the fiscal year ended October 31, 2002. The members of the Fund's Audit and Valuation Committee are Messrs. Anthony E. Aaronson, Peter D. Sacks and John T. Sheehy.

The Board of Directors also has a standing Contract Review Committee, composed entirely of Independent Directors. The Contract Review Committee reviews and makes recommendations to the Board of Directors with respect to entering into, renewal or amendment of the Fund's management agreement, advisory agreement, administration agreement, investor relations services agreement and other agreements. The members of the Fund's Contract Review Committee are Messrs. David L. Elsum, Neville J. Miles and William J. Potter.

The Board of Directors also has a standing Nominating Committee, composed entirely of Independent Directors. The Nominating Committee considers candidates for service as Fund Directors and remuneration to be paid to Fund Directors. The Nominating Committee does not consider nominees recommended by security holders. The members of the Fund's Nominating Committee are Messrs. Neville J. Miles, William J. Potter and John T. Sheehy.

During the Fund's fiscal year ended October 31, 2002, the Board of Directors held four meetings, the Audit and Valuation Committee held two meetings, the Contract Review Committee held no meetings, and the Nominating Committee held three meetings. Each of the Directors then in office attended at least 75% of the aggregate number of meetings of the Board of Directors and of all the Committees of the Board on which he served.

The following table sets forth information regarding compensation of Directors by the Fund and by the fund complex of which the Fund is a part for the fiscal year ended October 31, 2002. Officers of the Fund and Directors who are interested persons of the Fund do not receive any compensation directly from the Fund or any other fund in the fund complex for performing their duties as officers or Directors, respectively. In the column headed "Total Compensation From Fund and Fund Complex Paid to Directors," the number in parentheses indicates the total number of boards in the fund complex on which the Director serves or served at any time during the fiscal year ended October 31, 2002. In June 2001, the Board of Directors, upon the recommendation of the Fund's Nominating Committee, approved an increase in the fees payable to each Independent Director of the Fund from a $13,750 per year retainer fee, a fee of $1,000 per meeting for attendance at in-person Board meetings, and a fee of $1,000 per meeting for attendance at telephonic Board meetings, to an aggregate fee of $21,000 per year. Members of the Fund's Audit and Valuation Committee, Contract Review Committee, and Nominating Committee receive a fee of $500 per committee meeting attended, and the Chairman of each of these Committees receives an additional fee of $500 per committee meeting attended.

______________________
Mr. Fishwick resigned from the Board of Directors effective September 12, 2002.

Sir David Rowe-Ham resigned from the Board of Directors effective August 1, 2002.

Mr. Freedman is paid consulting fees by the Fund's Investment Manager equal to the fees paid to Independent Directors of funds in the fund complex of which Mr. Freedman is a director. For the fiscal year ended October 31, 2002, the amount of the consulting fees paid to Mr. Freedman was an aggregate of $32,000 with respect to the two funds of which Mr. Freedman is a director in the fund complex, of which $16,000 was paid with respect to the Fund.

Based solely on its review of the copies of such forms received by it and written representations from certain Reporting Persons that no year-end reports were required for those persons, and except as provided in the following sentence, the Fund believes that during the fiscal year ended October 31, 2002, its Reporting Persons complied with all applicable filing requirements. Mr. Neville Miles filed a Form 5 Annual Statement of Beneficial Ownership subsequent to the 45 day period specified in the Form.

Mr. Hugh Young, a Director and President of the Fund, also serves as a director of the Investment Manager and the Investment Adviser. Mr. Young is a shareholder of Aberdeen Asset Management PLC.

Under the terms of an Investor Relations Services Agreement, Aberdeen Fund Managers, Inc. (doing business under the name Aberdeen Asset Management Inc.), an affiliate of the Investment Manager and the Investment Adviser, provides investor relations services to the Fund for a monthly retainer of $5,000, plus out-of-pocket expenses.

On December 22, 2000, all of the shares of the Investment Manager, of the parent of the Investment Adviser, and of EquitiLink International (Channel Islands) Limited ("EICIL") were transferred to Aberdeen Asset Management PLC, pursuant to a Share Sale Agreement between Aberdeen on the one side, and entities of which Messrs. Laurence S. Freedman and Brian M. Sherman are the principal shareholders, and the shareholders of EICIL, on the other side. Total consideration for the sale was US $80 million, subject to certain adjustments. The consideration was paid in a combination of cash and preference shares issued by Aberdeen. At the time of the execution of the Share Sale Agreement, Messrs. Freedman and Sherman were Directors and the principal shareholders of the Investment Manager, and also served as, respectively, Joint Managing Director, and Joint Managing Director and Chairman, of the Investment Adviser. In connection with this sale, Messrs. Freedman and Sherman resigned as Joint Managing Directors of the Investment Adviser and as Directors of the Investment Manager.

The Board of Directors of the Fund, upon recommendation of the Audit and Valuation Committee, has selected PricewaterhouseCoopers LLP, independent accountants, to audit the financial statements of the Fund for the fiscal year ending October 31, 2003.

During the fiscal year ended October 31, 2002, the fees for services rendered by PwC were:

* This amount includes fees for services rendered by PwC to the Fund, the Investment Manager and Investment Adviser, and entities controlling, controlled by, or under common control with, the Investment Manager and Investment Adviser that provide services to the Fund.

The Audit and Valuation Committee of the Fund has reviewed information presented by the Fund's independent accountants that addressed the matters set forth in Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and considered whether the provision of non-audit services to the Fund and of professional services to the Fund's adviser and to entities controlling, controlled by, and under common control with, the Fund's adviser that provide services to the Fund is compatible with maintaining the independence of the Fund's independent accountants.

Representatives from PwC are expected to be present at the Meeting and will have the opportunity to respond to questions from stockholders and to make a statement if they so desire.

The Fund knows of no direct or indirect interest of PwC in the Fund.

Expenses. The expense of preparation, printing and mailing of the enclosed WHITE proxy card and accompanying Notice and Proxy Statement will be borne by the Fund. The Fund will reimburse banks, brokers and others for their reasonable expenses in forwarding proxy solicitation material to the beneficial owners of the shares of the Fund. In order to obtain the necessary quorum at the Meeting, supplementary solicitation may be made by mail, telephone, telegraph or personal interview. Such solicitation may be conducted by, among others, officers, Directors and employees of the Fund, the Investment Manager, the Investment Adviser or State Street Bank and Trust Company, the Transfer Agent of the Fund. Georgeson Shareholder Communications Inc. ("Georgeson") will be retained to assist in the solicitation of proxies. Georgeson will be paid approximately $90,000 by the Fund and the Fund will reimburse Georgeson for its related expenses.

Solicitation and Voting of Proxies. Solicitation of proxies is being made primarily by the mailing of this Proxy Statement with its enclosures on or about [insert date], 2003. As mentioned above, Georgeson will be engaged to assist in the solicitation of proxies. As the meeting date approaches, certain stockholders of the Fund may receive a call from a representative of Georgeson if the Fund has not yet received their vote. Authorization to permit Georgeson to execute proxies may be obtained by telephonic or electronically transmitted instructions from stockholders of the Fund. Proxies that are obtained telephonically will be recorded in accordance with procedures that Management of the Fund believes are reasonably designed to ensure that the identity of the stockholder casting the vote is accurately determined and that the voting instructions of the stockholder are accurately determined.

If a stockholder wishes to participate in the Meeting, but does not wish to give a proxy by telephone, fax or internet, such stockholder may still submit the WHITE proxy card originally sent with the Proxy Statement or attend in person. Any proxy given by a stockholder, whether in writing, by telephone, fax or via the internet, is revocable. A stockholder may revoke the accompanying proxy or a proxy given telephonically, by fax or via the internet at any time prior to its use by submitting a properly executed, subsequently dated proxy, giving written notice to the Secretary of the Fund, or by attending the meeting and voting in person.

Corporate Governance. The Fund is a Maryland corporation subject to the provisions of the Maryland General Corporation Law. The Fund's day-to-day operations and the requirements as to the place and time, conduct, and voting, at a meeting of the stockholders are governed by the Fund's charter and bylaws, the provisions of the Maryland General Corporation Law, and the provisions of the 1940 Act. Any stockholder who would like a copy of the Fund's charter or bylaws may obtain a copy from the SEC (www.publicinfo@sec.gov) or the Fund.

Beneficial Ownership; Change of Control. To the best of the Fund's knowledge, based upon filings made with the SEC, as of January 2, 2003, the only beneficial owner of more than five percent of the voting securities of the Fund was:

According to reports on Schedule 13D filed with the SEC on October 31, 2002, November 5, 2002, and December 23, 2002 by Bankgesellschaft Berlin AG (the "Bank"), the Bank owns an aggregate of 5,374,949 shares of common stock of the Fund. According to these reports, the Bank acquired 5,348,149 shares from Mira, L.P. ("Mira") in a private transaction, and the Bank subsequently acquired an additional 22,200 shares. These reports indicate that the source of the funds used by the Bank to purchase these shares was working capital, and the amount of the funds used to purchase such shares aggregated approximately $27,637,985 (exclusive of commissions).

The Fund has received notice from the Bank, as a dissident stockholder (the "Dissident Stockholder"), that the Dissident Stockholder proposes to submit at the Meeting: (i) the nomination of four individuals to serve as Class III Directors; (ii) a proposal to terminate the Management Agreement between the Fund and the Investment Manager, (iii) a proposal to terminate the Investment Advisory Agreement between the Fund and the Investment Adviser; and (iv) a proposal to urge the Board of Directors to amend the Fund's charter to change the name of the Fund. The Fund believes that the Dissident Stockholder will distribute its own proxy solicitation materials to stockholders. The Fund's Directors believe that the Dissident Stockholder will attempt to solicit your vote for the purpose, among other things, of electing directors who will serve the interests of the Dissident Stockholder, rather than the interests of all stockholders of the Fund. The Dissident Stockholder, which according to its report on Schedule 13D filed with the SEC, acquired its shares of the Fund within the past three months, is a short-term profit seeker in a fund whose principal investment objective is long-term capital appreciation, through investment primarily in equity securities of Australian companies listed on the Australian Stock Exchange. The Fund's Directors believe that the Dissident Stockholder will nominate candidates for positions on the Board of Directors to further the Dissident Stockholder's own agenda, which may include objectives unrelated and counter to the Fund's investment objectives and policies, and which could result in substantial harm to the Fund. The Fund's Board of Directors has considered each of the Dissident Stockholder's proposals and believes that these proposals are not in the best interests of the Fund or its stockholders. The Fund's Board
of Directors unanimously recommends that stockholders vote AGAINST all proposals submitted by the Dissident Stockholder at the Meeting. THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN ANY PROXY CARD BANKGESELLSCHAFT BERLIN AG MAY SEND YOU.

Stockholder Proposals. If a stockholder intends to present a proposal at the Annual Meeting of Stockholders of the Fund to be held in 2004 and desires to have the proposal included in the Fund's proxy statement and form of proxy for that meeting, the stockholder must deliver the proposal to Secretary of the Fund at the office of the Fund, Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102, and such proposal must be received by the Secretary no later than [date], 2003.

Stockholders wishing to present proposals at the Annual Meeting of Stockholders of the Fund to be held in 2004 which they do not wish to be included in the Fund's proxy materials must send written notice of such proposals to the Secretary of the Fund at the office of the Fund, Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102, and such notice must be received by the Secretary no sooner than November 21, 2003 and no later than December 21, 2003 in the form prescribed from time to time in the Fund's bylaws.

The financial statements contained in the Fund's Annual Report to stockholders for the fiscal year ended October 31, 2002 are incorporated by reference into this proxy statement.

The Board of Directors knows of no business to be brought before the Meeting other than as set forth above. If, however, any other matters properly come before the Meeting, it is the intention of the persons named on the enclosed WHITE proxy card to vote such proxies on such matters in accordance with their best judgment.

By Order of the Board of Directors,

Roy M. Randall, Secretary

Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
[Date], 2003

FIFTH: Stock.

(1) Authorized Shares. The total number of shares of stock which the Corporation has authority to issue is 50,000,000 shares, consisting of 20,000,000 shares of common stock, $.01 par value per share ("Common Stock"), and 30,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred Stock"). The aggregate par value of all shares of stock of the Corporation having a par value is $500,000. If shares of one class of stock are classified or reclassified into shares of another class of stock pursuant to this Article FIFTH, the number of authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of stock of all classes that the Corporation has authority to issue shall not be more than the total number of shares of stock set forth in the first sentence of this paragraph.

(2) Preemptive Rights. Stockholders shall not have preemptive rights to acquire any shares of the Corporation's stock.

(3) Common Stock. Subject to the Investment Company Act of 1940, as amended, and the voting rights of any holders of any class or series of stock hereafter designated pursuant to paragraphs (4) and (5) of this Article FIFTH, each share of Common Stock shall entitle the holder thereof to one vote.

(4) Preferred Stock. The Board of Directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, in one or more classes or series of stock.

(5) Classified or Reclassified Shares. Prior to issuance of classified or reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock set or changed pursuant to this paragraph (5) of this Article FIFTH may be made dependent upon facts or events ascertainable outside the charter (including determinations by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary filed with the SDAT.

The mission of the Audit and Valuation Committee (the "Committee") of Aberdeen Australia Equity Fund, Inc. (the "Fund"), under this Audit Charter, is to oversee the Fund's accounting and financial reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers, and to oversee the quality and objectivity of the Fund's financial statements and the independent audit thereof. The Committee will also report to the Board of Directors (the "Board"), if necessary, any relationships between the auditor and the Fund, or any other relationships, which come to the Committee's attention that may adversely affect the independence of the auditor.

The function of the Committee is to provide oversight; it is the responsibility of the Fund and the Fund's investment manager and investment adviser to maintain appropriate systems for accounting and internal control, and it is the responsibility of the Fund's independent auditors to plan and carry out a proper audit. The independent auditors are directly accountable to the Committee.

The Committee shall be composed of at least three members. Each member must have been determined not to be an "interested person" (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended ("1940 Act")) of the Fund (an "Independent Director") and, in addition, each member shall have the additional qualifications indicated below. The President of the Fund, although not a member of the Committee, will nonetheless be expected to have a significant role in assisting the Committee to discharge its responsibilities, including ensuring adequate access to, and support from, the staff of the Fund's investment manager, Aberdeen Asset Managers (C.I.) Limited (the "Manager"), and the staff of the Fund's investment adviser, Aberdeen Asset Management Limited (the "Adviser").

5.    If at least one member of the Committee is not a "financial expert" (as that term is defined in the rules and regulations of the SEC), the Fund's periodic reports shall disclose the reason why.

Duties and Powers

16.    To report its activities to the full Board on a regular basis and to make such recommendations with respect to the above and other matters as the Committee may deem necessary or appropriate

Other Powers and Responsibilities

1.    The Committee normally shall meet in person twice yearly, in June and December, prior to the meetings of the full Board, and may meet at such other time or times as the Committee or Board may determine appropriate or necessary, and is empowered to hold special meetings as circumstances require.

2.    Each December, the Committee shall make a report indicating whether the Committee (i) reviewed and discussed the financial statements with management; (ii) discussed the matters required by SAS 61, as modified or supplemented; and (iii) received from the auditors the letter and written disclosure required by ISB Standard No. 1, and discussed with the auditors their independence. The Committee's report should also indicate whether the Committee, based on its review and its discussions with management and the auditors, recommends to the Board that the financial statements be included in the Fund's annual report for the last fiscal year.

3.    The Fund's officers shall provide, or arrange to provide, such information, data and service as the Committee may request. The Committee shall conduct interviews or discussions as it deems appropriate with personnel of the Fund, and/or others whose views would be considered helpful to the Committee. The Committee may ask management and representatives of the service providers to attend meetings as necessary.

4.    The Committee shall have the resources and authority appropriate to discharge its responsibilities, including authority to engage legal counsel and to retain experts or other persons with specific competence at the expense of the Fund.

The undersigned stockholder of Aberdeen Australia Equity Fund, Inc., a Maryland corporation (the "Fund"), hereby appoints Beverley Hendry, William J. Potter, and Timothy Sullivan, or any of them, with full power of substitution in each of them, to attend the Annual Meeting of Stockholders of the Fund to be held at Dryden Hall, 7^th Floor, Plaza Building, 751 Broad Street, Newark, New Jersey on Thursday March 20, 2003, at 9:30 a.m. (Eastern time), and any adjournment or postponement thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise to represent the undersigned at the meeting with all powers possessed by the undersigned if personally present at the meeting. The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting of Stockholders and of the accompanying Proxy Statement and revokes any proxy heretofore given with respect to such meeting.

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Aberdeen Australia Equity Fund, Inc. offers shareholders of record four alternative ways of authorizing proxies:

TELEPHONE       Available only until 5:00 p.m. Eastern Daylight Time March 19, 2003.

INTERNET         Available only until 5:00 p.m. Eastern Daylight Time March 19, 2003.

• Visit the Internet voting Website at http://proxy.georgeson.com
• Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the instructions on your screen
• You will incur only your usual Internet charges

MAIL

• Simply sign and date your proxy card and return it in the postage-paid envelope

                                            COMPANY NUMBER                        CONTROL NUMBER

TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE

(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE

(1)         Election of the following four nominees to serve                                                 For                          Withhold
              as Class III Directors for three-year terms and                                                      / /                                    / /
              until their successors are duly elected and qualify:
              Laurence S. Freedman, David L.Elsum
              Peter J. O'Connell and William J. Potter

(2)         Proposal to amend the Fund's charter to increase                                               For                Against                Abstain
              the number of authorized shares of stock, to authorize an                                 / /                     / /                          / /
              undesignated class of preferred stock and to authorize
             the Board of Directors to classify and reclassify shares
             of preferred stock

(3)          Proposal to amend the Fund's fundamental                                                        For                Against                Abstain
               borrowing policy                                                                                                      /  /                     / /                          / /

(4)(A)    Proposal to amend the Fund's Management Agreement                                  For                Against                Abstain
               to provide that fees paid thereunder to the Investment                                    / /                      / /                          / /
              Manager will be based on all managed assets

(4)(B)    Proposal to amend the Fund's Investment Advisory                                         For                Against                Abstain
             Agreement to provide that fees paid thereunder to the                                       / /                     / /                          / /
             Investment Adviser will be based on all managed assets

(5)        Stockholder proposal that the stockholders of the Fund                                   For                  Against                 Abstain
            ask the Board of Directors to consider taking the steps                                      / /                      / /                            / /
            necessary to convert the Fund to an open-end fund or
            otherwise permit stockholders to realize net asset value
            for their shares.