Despite being the A in the very popular EAFE developed market index, most investors have little exposure to Australia outside funds like the iShares MSCI EAFE (NYSE:EFA). That’s a real shame as the nation continues to be emerging as Asia’s go-to spot for natural resources. With those developing markets still craving all matters of commodities, Australia makes for a prime spot for investment.

And despite recent market highs, Australia’s key resource sector is getting a major shot in the arm via a few key policy changes.

For investors, making a direct play for the “Land Down Under” could be one of the best bets for a portfolio in long run.

Natural Resources Get A Big Boost

Much of Australia’s fortunes stems from its vast commodity wealth and its prime location near emerging Asia. Rich in coal, natural gas and other minerals, the nation has become the exporter du jour for China and its neighbors in order to fuel their torrid growth. While some of the commodity “bubble” may have burst, the longer term picture still shows that Asia will need a plethora of commodities to fuel its needs.

That key resource production in the country recently got a few major boosts.

First has been the falling Australian dollar. The Reserve Bank of Australia (RBA) aggressively cut its key interest rate as the commodity cycle begun to slow. That’s caused the Aussie to fall over 15% this year to stand at less than 90 cents versus a U.S. dollar and is now sitting at a three-year low against the greenback. 

That’s key as a lower Aussie makes the nation’s exports more competitive on the global market. That in turn boosts profits at those large Australian miners who price their products in U.S. dollars. For example, mega-miner BHP Billiton (NYSE:BHP) realizes a $100 million Australian dollars in profit for every penny the currency falls versus the dollar. The RBA has already signaled that would reduce rates by another quarter point by the end of the year. 

Secondly, newly elected officials are giving the key Australian commodities sector another shot in the arm. Newly elected Prime-minister Tony Abbott has pledged to write off both the nation’s the carbon tax and the Minerals Resource Rent Tax (MRRT). The MRRT represented a tax on profits at some of the largest miners in the nation and was blamed for widespread mine closures and layoffs. 

All in all, the central bank forecasts that GDP growth for the nation will hit 2.7% in 2014 and 3% in 2015 based on the policy changes. That’s about double the mean estimates for the United States. 

Making A Play

Given the bullish expansion in its key basic materials sector, investors may want consider adding the land down under to a portfolio. While a few Aussie firms do trade on the big-boards- like James Hardie Industries (NYSE:JHX) and Westpac Banking (NYSE:WBK) –the nation is one of best bets to add via exchange traded funds (ETFs). Here’s some top choices.

The iShares MSCI Australia Index (NYSE:EWA) still remains the top choice for investors looking to add a swath of the country to a portfolio. The ETF spreads its $2 billion in assets across 70 different firms including Rio Tinto (NYSE:RIO) and retailer Woolworths. Basic materials and energy make up about 25% of the fund’s holdings making a good play on the nation’s continued resource growth. Expenses are also pretty cheap at 0.53%. Another opportunity, could be in the WisdomTree Australia Dividend (NASDAQ: AUSE), which weights its constituents by dividends paid. However, it should be noted that EWA pays a much heftier distribution than AUSE. 

Perhaps to get the most resource related bang for your Australia buck, investors should think small. The IQ Australia Small Cap ETF (NASDAQ:KROO) tracks 100 different smaller Aussie firms with the bulk of its holdings in the commodities sector. However, shares aren’t very liquid and investors should use limit orders when accessing the fund to avoid overpaying. 

Finally, given bonds inverse relationship with interest rates investors may want consider both the WisdomTree Australia & NZ Debt (NASDAQ:AUNZ) and PIMCO Australia Bond Index ETF (NYSE:AUD). The ETFs can be used to add a wide swath of Australian debt to a portfolio and profit from falling interest rates.

The Bottom Line

Australia is often overlooked by investors. However, the nation’s commodity sector is the envy of the world. That key contributor is about to get even more powerful given some recent policy changes. For investors, adding a dose of Australian firms to a portfolio could be a great bet in the near term.  

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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