FIAT has made a stylish return to the Australian market with a little stunner that has become Europe's biggest-selling car.

The Italian brand - part of an impressive corporate family that boasts Ferrari, Maserati and Alfa Romeo - has not sold cars Down Under since the late 1980s.

However, it's back and the first of several new Fiat models expected to be rolled out is a bold compact hatch called the Punto.

The petite beauty is offered in four variants here - a five-door hatchback with the choice of 1.4-litre petrol or 1.3-litre diesel engines, and three-door versions with either a 88kW or 96kW 1.9-litre turbo-diesel engines.

Prices start at $19,990 for the five-door 1.4 petrol Dynamic and rise to $27,990 for the 1.9-litre turbo-diesel Sport.

One of the newcomer's biggest drawcards is its amazing looks.

These have been chiselled by Guigiaro, the design house commissioned to create visual masterpieces for Maserati and Alfa.

But with the Punto, you get the designer label at a much more affordable price.

We tested the Sport three-door and then hopped into the 1.3-litre five-door job.

This was probably the wrong order, because the difference in performance was considerable.

Admittedly the Sport was bright red, but it has a lot more punch. Not startling off the mark, by any means, but dip into some of that lovely torque and there's fun to be had. Most of this comes on between 1750 and 3250rpm, so you find yourself enthusiastically shifting through the gears.

The official 0-100km/h figure is a fair 9.5 seconds.

Overall the performance is respectable, but not quite in the same company as some of the turbo-diesels getting around these days.

The 1.9-litre Sport is mated to a tidy six-speed manual transmission, which is extremely co-operative.

Economy, as you would expect, is excellent and we averaged around 5.8 litres of diesel for every 100km covered.

Handling is slick and the Punto whizzes around corners, thanks to its sporty suspension and low-profile tyres.

It is equally at home cutting through the city traffic, or idling in sixth gear on the highway speed limit.

The electric power steering works wonderfully, offering a dual-mode that makes it lighter if you are driving below 30km/h. This makes parking a breeze.

The Punto package includes an array of goodies, including six airbags, anti-lock brakes, air conditioning, CD player with audio controls on steering wheel, cruise control, power windows and mirrors, a comprehensive trip computer with consumption gauge, and remote central locking.

In the Sport, you get some funky front seats with raised plastic dots in the base, brushed metal trim, leather-trimmed steering wheel and gear knob, traction control and fog lights.

Get a flat tyre, though, and you won't find a spare _ just a foam and pump kit.

Comfort levels for the driver and front passenger are good, but all bar children and jockeys will find the back seat a little cramped.

The interior is cleverly designed, with the exception of the drink holders that drinks don't fit in. Coffee cups must be much smaller in Europe.

Climbing out of the 1.9-litre Sport version and into the 1.3-litre diesel initially was a let-down.

It seemed to take an eternity to get going, but as you become accustomed to the lack of urgency, the smaller engine is not that hard to live with. And those with an eye on bowser prices will love it.

Commuters, in particular, will be more than happy to pilot the 1.3 Punto, which can average under five litres/100km.

Fiat is hoping for big things from its little performer, which has a five-star NCAP rating in European tests and even a rally championship victory under its belt.

There's no doubt it will find favour with those looking for a compact hatch that makes a real fashion statement