PETER CAVE: As people lose thousands in the stock market some are turning their attention to a less conventional form of investment.

Australian art, and in particular Indigenous works of art, are still achieving record prices despite the economic hard times.

The boom is being fuelled by international interest in Aboriginal paintings, as Paula Kruger reports.

PAULA KRUGER: 2007 was a big year in the Australian art market. It saw a record set for the highest price paid for an Australian painting when John Brack's "The Old Time" sold for $3.36 million.

In May last year a painting by Emily Kngwarreye sold for more than a million dollars. That set a record for an Indigenous painting and was also the highest price paid for a work of art by an Australian woman.

In 2008 it is obvious that there are tough economic times ahead but last night in Sydney records were broken in sale prices for three Indigenous artists. A Judy Watson Napangardi painting called "Women's Dreaming" fetched the highest price of $216,000.

Tim Abdallah is the national head of art at the auction house Deutscher-Menzies. He says it was a good night and that the art market can act inversely to financial markets.

TIM ABDALLAH: In the past when there was a stock exchange downfall, that the art market actually boomed for a period of about two years, this is 1987. Our boom lasted from '87 up till '89, directly after the stock exchange collapse.

And in the intervening, in the last 10 years or so, we frequently encounter people who walk in the door here and tell us that they're sick of their shares, they don't want to, they don't want boring pieces of paper. The shares haven't performed for them. They'd rather have a painting.

It is a lifestyle investment which has got genuine possibilities for being a major earner.

PAULA KRUGER: Looking specifically at Indigenous art, is that doing particularly well at the moment?

TIM ABDALLAH: It is. It's been an interesting thing to observe. The Indigenous market is actually a little bit of a separate affair to the non-Indigenous market. It has a different audience. Often collectors do step in both fields but what we're seeing is that international collectors are the big variable with Aboriginal art.

And often with our sales the major works and the more expensive items are sought out by collectors in Belgium and Spain and Holland and Austria and amazing places like that. It's quite an unusual aspect of the Australian art market.

PAULA KRUGER: International art collectors generally have little interest in Australia's non-Indigenous artists and the fact that they are buying Indigenous artwork means that boom will be more sustainable and therefore a better investment.

TIM ABDALLAH: I think that if you broaden the market and increase the size of the market it will always make it a more substantial market, it'll be a more stable market, and it'll spread the risk over different economies and different currencies and so forth.

PAULA KRUGER: So for an Australian investor that maybe has had enough of their shares and wants to sell up, the wiser choice would be to look at Indigenous art as opposed to a Sidney Nolan?

TIM ABDALLAH: Absolutely. Although, you know, in the Indigenous market what we have noticed is that the market has distinctly polarised. I mean, it's a factor also in the non-Indigenous market that there's a difference between the best and the worst and the gulf in the Aboriginal market seems to be much wider. There's quite a lot of Australian Aboriginal art that is almost completely unsaleable on the secondary market. It's not good news.

But if collectors are buying from the right source and if they're engaged in the process on a fairly serious level, that's where they should be okay. It's picking up things at duty free shops and in airports and that kind of thing, that that's where the collectors might come a cropper.

PETER CAVE: Tim Abdallah from Deutscher-Menzies auction house speaking to Paula Kruger.