Shoppers will benefit from cheaper prices on wine and other Australian imports while UK exports in premium items like Scottish whisky and cars will rise significantly.
The pact is the first "from scratch" negotiated since the UK left the EU's single market.
It was agreed in principle in June and sealed in an online ceremony last night after the fine print was hammered out.
International Trade Secretary Anne-Marie Trevelyan said: "Today we demonstrate what the UK can achieve as an agile, independent, sovereign, trading nation.
"This is just the start as we get on the front foot and seize the seismic opportunities that await us on the world stage."
The 2,000-page deal wipes out tariffs and is expected to unlock ￡10.4billion of extra trade a year between the two nations - a rise of 53 percent.
It is made up of ￡6.2billion in exports to Australia, a 44 percent increase, and imports of ￡4.2billion - up by 66 percent.
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The agreement is predicted to boost national income by ￡2.3billion a year by 2035 and that is expected to feed through into higher wages, with take-home pay in the UK tipped to rise by ￡900million compared to 2019.
The Government believes the deal will provide a real boost for its plans to level up the economy by creating opportunities across the UK.
UK firms will also have guaranteed access to bid for an additional ￡10billion worth of Australian public sector contracts a year.
Meanwhile architects, scientists, researchers, lawyers and accountants will have access to protected visas to work in Australia for the first time.
Young people will also be able to work and travel to Australia for up to three years at a time after existing visa conditions were removed.
The deal is also expected to boost Britain's bid to join the lucrative Indo-Pacific trading block of 11 nations.
Stephen Phipson, CEO of Make UK, the manufacturers organisation, said: "Achieving a preferential trade arrangement with Australia is welcome."