Australian filmmaker Sue Brooks says she is "gobsmacked".

Her drama Looking For Grace, shot in the Western Australian wheat belt, has been selected for a world premiere in the prestigious competition at Venice Film Festival.

"It's exciting," she says. "That was just beyond our dreams."

Looking For Grace, which stars Radha Mitchell, Richard Roxburgh, veteran Terry Norris and rising teenage star Odessa Young, centres on a couple searching for their missing daughter and her friend who have run away to see their favourite band.

"It tells the story from different people's points of view - the mother, the father and a retired detective," Brooks says.

Developed under the not-quite-so-poetic title Driving Back From Dubbo, the film was reluctantly withdrawn from a hometown debut at Melbourne International Film Festival when it was selected for Venice.

Best known for Japanese Story and Subdivision, Brooks is the first Australian female director with a film in the Venice competition since Clara Law's The Goddess Of 1967 in 2000.

She says that launching the film at the festival is both "fantastic and scary".

The film, described as a drama with wry comic touches, will be released in cinemas on Australia Day 2016.

Palace Films' General Manager Nicolas Whatson​ said Japanese Story was one of the company's most beloved and successful Australian releases so backing Brooks' new film was "an immediate yes".

"Looking for Grace might be a story of an 'ordinary' family but it bears Sue's characteristic humour and pathos, and once again she takes her characters - and the audience - down unpredictable pathways," he says.

Other Australian directors to have competition films at the festival include John Curran with Tracks two years ago, preceded by John Hillcoat​ with The Road, Rolf de Heer​ with The Tracker and Jane Campion with Holy Smoke.

Looking for Grace will join three other Australian films that were announced as festival selections last week:

Director Michael Rowe, who won the Caméra d'Or at Cannes with Leap Year five years ago, has the Canadian-Australian co-production Early Winter screening. It is described as a story about "a man in quiet crisis, working long hours at a rest home to support his family, which he feels may be on the edge of collapse".

Bentley Dean and Martin Butler's Tanna, shot with a Vanuatu tribe, will screen in Venice Critics' Week.

Simon Stone's The Daughter, which also stars Odessa Young alongside Ewen Leslie, Geoffrey Rush, Miranda Otto and Paul Schneider​, will screen on the closing night of Venice Days.