KLEINWORT BENSON AUSTRALIAN INCOME FUND, INC.
75 WALL STREET
NEW YORK, NEW YORK 10005

----------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

----------

To our Stockholders:

Notice is hereby given that the Annual Meeting of Stockholders of
Kleinwort Benson Australian Income Fund, Inc. (the "Fund") will be held on
Thursday, April 2, 1998, at 11:00 a.m. at 75 Wall Street, 35th floor, New York,
New York 10005, for the following purposes:

(1) To elect three class I Directors and one Class II Director
("Proposal No. 1").

(2) To act upon a proposal to ratify the selection of Price
Waterhouse as Independent Accountants for the Fund for the
fiscal year ending October 31, 1998 ("Proposal No. 2").

(3) To transact such other business as may properly come before
the meeting.

Stockholders of record at the close of business on February 6, 1998 will
be entitled to vote at the Meeting. The Fund's annual report to stockholders for
the 1997 fiscal year is being mailed to all such stockholders prior to or with
the mailing of this notice and proxy statement.

By order of the Board of Directors,

Michael Fortier
Secretary

February 20, 1998

If you do not expect to be present at the meeting, please date, fill in
and sign the enclosed form of Proxy and mail it in the enclosed return envelope.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.

KLEINWORT BENSON AUSTRALIAN INCOME FUND, INC.

75 Wall Street
New York, New York 10005
PROXY STATEMENT

----------

ANNUAL MEETING OF STOCKHOLDERS

----------

This Proxy Statement is furnished to the stockholders of KLEINWORT BENSON
AUSTRALIAN INCOME FUND, INC. (the "Fund") in connection with the solicitation by
the Board of Directors of the Fund of proxies to be used at an Annual Meeting of
Stockholders of the Fund to be held at the offices of the Fund's Investment
Advisor and Administrator, Kleinwort Benson Investment Management Americas Inc.,
75 Wall Street, 35th Floor, New York, NY, on Thursday, April 2, 1998 at 11:00
a.m. for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.

Stockholders of record at the close of business on February 6, 1998 will
be entitled to vote at the Meeting. If a proxy is executed and returned, the
shares represented thereby will be voted at the Meeting. Any stockholder giving
a proxy will have the power to revoke it by notice in writing received by the
Secretary of the Fund, c/o Kleinwort Benson Investment Management Americas Inc.,
75 Wall Street, New York, NY 10005, prior to the exercise of such proxy at the
Meeting. Also, any stockholder attending the Meeting may vote in person whether
or not she or he has previously filed an executed proxy. Each proxy will be
voted in accordance with the directions given thereon by the stockholder. If no
specific directions to the contrary are given, a proxy will be voted for the
election of each nominee named in Proposal No. 1 and in favor of Proposal No.
2.

If a properly executed proxy is returned and accompanied by instructions
to withhold authority to vote (an abstention), the shares represented thereby,
with respect to each matter to be determined by a majority of the votes cast on
such matter (each of Proposal No. 1 and Proposal No. 2), will be considered
present for purposes of determining the existence of a quorum for the
transaction of business but, not being cast, will have no effect on the outcome
of such matters.

A quorum for the Meeting will consist of one-third of the shares
outstanding. In the event that a quorum is not represented at the Meeting or,
even if a quorum is so represented, in the event that sufficient votes in favor
of any proposal set forth in the Notice of Meeting are not received prior to the
Meeting, the persons named as proxies may, but are under no obligation to, with
no other notice than announcement at the Meeting, propose and vote for one or
more adjournments of the Meeting in order to permit further solicitation of
proxies with respect to such proposal. The Meeting may be adjourned with respect
to one (or both) of the proposals in the Proxy Statement, and a stockholder vote
may be taken on the other proposal prior to any adjournment if sufficient votes
have been received for its approval. Shares represented by proxies indicating a
vote against a proposal will be voted against adjournment as to that proposal.

On February 20, 1998 there were 11,954,566 outstanding shares of the Fund.
On such date, no person to the knowledge of the Fund owned 5% or more of the
outstanding shares of the Fund. Each share or fractional share outstanding on
the record date will be entitled to one vote or fractional vote at the meeting.

The cost of soliciting proxies for the Annual Meeting of Stockholders,
consisting primarily of printing and mailing expenses, will be paid by the Fund.
This solicitation is being made by the use of the mails, but may also be made by
telephone, telegraph and personal interview. Proxies should be returned to the
Fund's Transfer Agent,

Boston EquiServe, in the enclosed envelope. This Proxy Statement and
accompanying form of proxy are first being sent to stockholders on or about
February 27, 1998.

Copies of the Fund's most recent Annual and Semi-Annual Reports may be
obtained without charge by calling (800) 237-4218 or by writing the Fund at 75
Wall Street, New York, NY 10005.

ELECTION OF DIRECTORS
Proposal No. 1

At the Meeting, four of the eight Directors of the Fund are to be elected.
Each of the Class I Directors will be elected for a period of three years and
until his successor has been elected and qualified. The one Class II Director,
who has filled a vacancy in Class II, will serve until the Class II term expires
in 1999 and until his successor has been elected and qualified. It is the
intention of the persons named in the enclosed form of proxy to vote the shares
represented thereby for the election of the following nominees as Directors of
the Fund. Each nominee is a member of the present Board of Directors of the
Fund. Three of the nominees (Sir Robert C. Cotton, David M. Felder and James J.
Foley) were elected by stockholders of the Fund. The other nominee (Stephen K.
West) was elected by the Board of Directors at a meeting held on May 23, 1997,
which was subsequent to the most recent stockholders meeting.

Set forth below are the nominees for election to the Fund's Board of
Directors, together with certain other information:

Shares of Common
Stock Owned at
Position with Principal Occupation and February 20, 1998
Name and Address Age the Fund other Affiliations (and % of Fund) Class
------------------- --- ------------- ------------------------------- ----------------- -----

Sir Robert C. Cotton 82 Director and Chairman, Australian Photonics 6,000 I
2 Spruson Street Chairman of Co-operative Research Centre; (0.05%)
Neutral Bay, NSW 2089 the Board Director, Thomson-CSF Pacific
Australia since 1986 Pty. Ltd. Formerly Australian
Ambassador to the United States
(1982-1985).

+ David M. Felder 42 Director and Senior Fixed Income Manager: 0 I
10 Fenchurch Street President Kleinwort Benson Investment
London, EC3M 3LB since 1994 Management Americas Inc. (since
England 1991) and Dresdner RCM Global
Investors (UK) Ltd. (formerly
Kleinwort Benson Investment
Management Limited) (since 1988).

James J. Foley (1) 73 Director since From 1952-1990, Faculty Member, 1,536 I
60 Pond Street 1986 Harvard Graduate School of (0.00%)
Belmont, MA 02178 Business. Since January 1991:
Consultant to the School's MBA
Admissions Board; Consultant to
Courier Corp.

- ----------
+ Mr. Felder is an "interested person" of the Fund because he is an officer
of the Fund's investment advisor.
(1) Member, Audit Committee. The Committee reviews and reports to the Board
with respect to the scope and results of the examination of the financial
statements of the Fund by the independent accountants and related matters.

+ Stephen K. West 69 Director since Partner, Sullivan & Cromwell 0 II
42 Old Wood Road 1997 (1964-1996); Of Counsel, Sullivan
Bernardsville, NJ 07924 & Cromwell (since 1997); Director,
AMVESCAP plc; First ING Life
Insurance Company of New York;
ING American Holdings, Inc.;
Pioneer Funds; Swiss Helvetia
Fund, Inc.; Winthrop Focus Funds.

Class II Directors' terms will expire in 1999 and Class III Directors'
terms will expire in 2000. The following Directors of the Fund will continue to
serve in such capacity until their terms of office expire and their successors
are duly elected and qualified.

Nigel S. MacEwan 64 Director since Retired; formerly President and 0 II
153 Oenoke Lane 1992 Chief Executive Officer, Kleinwort
New Canaan, CT 06820 Benson North America, Inc., and
Director, Kleinwort Benson Group
plc (1986-1993); formerly Director,
Alex Brown Kleinwort Benson
Realty Advisors (1992-1994).

The Earl of Limerick (1) 67 Director since Chairman, Pirelli UK plc and asso- 0 III
11 Berkeley Street 1986 ciated companies (since 1989);
London, W1X 6BU Chairman, AMP Asset Manage-
England ment plc (since 1992); Chairman,
De La Rue plc (Director since
1983, Chairman since 1993);
Chairman, Board of Governors,
London Guildhall University
(since 1984). Formerly Non-
Executive Director of Kleinwort
Benson Group plc and associated
companies (retired 1990).

- ----------
+ Mr. West is an "interested person" of the Fund because of his affiliation
with Sullivan & Cromwell, counsel to the Fund.
(1) Member, Audit Committee. The Committee reviews and reports to the Board
with respect to the scope and results of the examination of the financial
statements of the Fund by the independent accountants and related matters.

Shares of Common
Stock Owned at
Position with Principal Occupation and February 20, 1998
Name and Address Age the Fund other Affiliations (and % of Fund) Class
- --------------------- --- ------------- ------------------------------- ----------------- -----

Leonard T. Hinde (1) 72 Director since Formerly Advisor to the Governor, 0 III
8 Earl Street 1987 Reserve Bank of Australia (retired
Mosmon, NSW 2088 1985).
Australia

G. William Miller (1) 72 Director and Chairman and CEO, G. William 20,000 III
1215 19th Street N.W. Deputy Miller & Co. Inc. (since 1983); (0.17%)
Washington, DC 20036 Chairman Chairman and CEO, Federated
since 1986 Stores, Inc. (1991-1992);
Chairman and Director, Waccamaw
Corporation (since October 1995);
Director, GS Industries (since
October 1995), Simon-DeBartolo
Group, Inc. (since August 1996)
and Repligen Corporation (since
1982); Trustee, Marine Biological
Laboratory (since August 1996).

- ----------
(1) Member, Audit Committee. The Committee reviews and reports to the Board
with respect to the scope and results of the examination of the financial
statements of the Fund by the independent accountants and related matters.

The executive officer of the Fund, other than as already shown, is
described below.

Michael Fortier is the Secretary and Treasurer and Principal Financial and
Accounting Officer and has held these offices since February 1994 and December
1996, respectively. Mr. Fortier is 35 years old and is a Vice President of
Dresdner Kleinwort Benson North America Services LLC and has been employed by
Dresdner Kleinwort Benson and affiliates since 1987.

The directors and officers of the Fund as a group owned less than 1% of
the shares outstanding as of February 20, 1998.

The Fund reimburses all Directors for their out-of-pocket and travel
expenses. For the period November 1, 1996 to October 31, 1997, there were two
meetings of the Fund's Board of Directors. All Directors attended all meetings
held during the year.

The Board of Directors has an Audit Committee. The Audit Committee makes
recommendations to the full Board with respect to the engagement of independent
accountants and reviews with the independent accountants the plan and results of
the audit engagement and matters having a material effect upon the Fund's
financial operations. The members of the Audit Committee during fiscal 1997 were
Messrs. Foley, Miller, Hinde and The Earl of Limerick. The Audit Committee met
twice during the period November 1, 1996 to October 31, 1997 and all Committee
members attended each meeting.

Set forth below is information concerning compensation paid to the Fund's
current directors and officers during its fiscal year ended October 31, 1997:

Total Compensation
Pension or Retirement from Fund and Fund
Aggregate Compensation Benefits Accrued as Part Estimated Annual Benefits Complex Paid to
Name and Position from Fund of Fund Expenses Upon Retirement Directors
- ------------------- ---------------------- ------------------------ ------------------------- ------------------

Sir Robert C. Cotton, $10,665 None None $10,665
Director & Chairman of
the Board

David M. Felder, None None None None
Director & President

James J. Foley, $11,000 None None $11,000
Director

Leonard T. Hinde, $12,998 None None $12,998
Director

The Earl of Limerick, $13,677 None None $13,677
Director

Nigel S. MacEwan, $8,000 None None $8,000
Director

G. William Miller, $12,000 None None $12,000
Director &
Deputy Chairman

Stephen K. West, None None None None
Director

Michael Fortier, None None None None
Secretary and
Treasurer & Principal
Financial and Accounting
Officer

SELECTION OF INDEPENDENT ACCOUNTANTS
Proposal No. 2

A majority of the members of the Board of Directors who are not interested
persons of the Fund have selected Price Waterhouse as independent accountants
for the Fund for the year ending October 31, 1998. The ratification of the
selection of independent accountants is to be voted upon at the meeting and it
is intended that the persons named in the accompanying proxy vote for Price
Waterhouse. A representative of Price Waterhouse will attend the meeting if so
requested by a stockholder.

The Board of Directors' policy regarding engaging independent accountants'
services is that Management may engage the Fund's independent accountants to
perform any service(s) normally provided by independent accounting firms,
provided that such service(s) meets any and all of the independence requirements
of the American Institute of Certified Public Accountants and the Securities and
Exchange Commission. The Audit Committee will review and approve services
provided by the independent accountants prior to their being rendered. The Board
of Directors also receives a report from the Audit Committee relating to all
services after they have been performed by the Fund's independent accountants.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 2.

OTHER MATTERS

Management does not know of any matters to be presented at the Meeting
other than those stated above. If any other business should come before the
Meeting, the persons named in the Proxies intend to vote thereon in accordance
with the views of the Fund's management.

STOCKHOLDER PROPOSALS

It is expected that the next meeting of stockholders will be held on or
about February 11, 1999. A stockholder's proposal intended to be presented at
the 1999 meeting of stockholders of the Fund must be received by the Fund by
October 14, 1998 in order to be included in the Fund's Proxy Statement and Form
of Proxy relating to such meeting.

By order of the Board of Directors,

Michael Fortier
Secretary

February 20, 1998

KLEINWORT BENSON AUSTRALIAN INCOME FUND, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS of Kleinwort Benson Australian
Income Fund, Inc. for use at the Annual Meeting of Stockholders to be held at 75
Wall Street, 35th Floor, New York, NY on April 2, 1998 at 11:00 a.m. New York
time. The undersigned hereby appoints Michael Fortier and Kimberly Fusaro, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated Meeting and at all adjournments thereof, all shares of
the Fund held of record by the undersigned on the record date for the Meeting
upon the following matters, and upon any other matter which may properly come
before the Meeting or any adjournment thereof, in their discretion.

------------
(Continued and to be signed on the reverse side) SEE REVERSE
SIDE

- ---
X Please mark your votes as in this example.
- ---

Every properly signed proxy will be voted in the manner specified hereon and, in
the absence of specification, will be treated as GRANTING authority to vote
FOR the election of each Director and FOR Proposal 2.

1. ELECTION OF DIRECTORS:
Nominees: Sir Robert C. Cotton, David M. Felder, James J. Foley, Stephen
K. West

FOR WITHHOLD
---- ----

---- ----
- ----

- ---- --------------------------------------
For all nominees except as noted above

2. Proposal to ratify the selection of Price Waterhouse LLP as the Fund's
Independent Accounts.

FOR AGAINST ABSTAIN
---- ---- ----

---- ---- ----

3. In their discretion, the proxies are authorized to vote in their best
judgment upon such other matters as may properly come before the Meeting
or any adjournment thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ----

----

PLEASE SIGN, DATE AND RETURN PROMPTLY.

Receipt of Notice of Meeting and Proxy Statement is hereby acknowledged.

IMPORTANT: Please be sure to give ALL information requested above, including
FULL title.

Signature: Date:
----------------------------- ---------------