Following a dispute with the Poetry Society of Australia in 1964, for which she had been editor of Poetry Magazine since 1961, Grace Perry founded Poetry Australia and the publishing house South Head Press.
Committed to producing a fine poetry magazine devoid of factions, Perry published a diverse range of styles and subjects in Poetry Australia. The magazine also fostered emerging Australian poets, sponsoring many workshops, literary seminars and visits from overseas writers. Commemorative issues were devoted to Francis Webb and David Campbell and special regional issues devoted to Australian states and territories were also produced. In addition, the work of individual poets such as John Tranter, Jennifer Maiden, John Millett, Heather Cam, Peter Goldsworthy and Meredith Wattison was featured in special issues. In 1985 a selection of poems mostly by well-established poets appeared in Poetry Australia - Twenty One Years, celebrating twenty-one years of publication.
Perry aimed to produce a magazine of international significance while maintaining a strong Australian presence. To this end, the work of many international writers, including translations, appeared in Poetry Australia, but most issues did not identify the contributors' nationality. International contributors included Ezra Pound, Ted Hughes, Seamus Heaney, Richard Murphy and Margaret Atwood. Translations included early Russian poets by Rosemary Dobson and David Campbell, Laurence Springarn's translations from Portugese and Mark Scrivener's translations of German classics. Poetry Australia also published special issues of New Zealand, Canadian, Italian, Japanese, Dutch and Flemish, American, Gaelic, French, Austrian, Swedish and Papua New Guinean poetry.
In 1985 the magazine won the NSW Premier's Special Literary Award. Grace Perry died in 1987. John Millett continued as editor until 1992 when Poetry Australia ceased production. Millett subsequently helped to establish the Poetry Australia Fund and this fund was instrumental in the establishment in 2002 of the magazine Blue Dog: Australian Poetry, which editor Ron Pretty declares is in 'direct line of succession from Poetry Australia.'