Davies was born on 22 May 1955 in Wauchope, New South Wales and was first attracted to bagpipes at the age of six. He played oboe with the Sydney Youth Orchestra and was a member of the Epping Boys High School Band where he also played the euphonium. He went on to be an oboe and composition student at the New South Wales Conservatorium of Music, but dropped out at age 21 to pursue a professional career.

Davies first performed professionally as a 16-year-old musician with the Lucy Fields Jug Band, led by Lindsay Campbell around 1971. The band secured a recording contract with M7 Records, but the company changed hands shortly thereafter and the band’s album was never released. In 1974, Davies performed Handel’s Concerto for Oboe in E♭ major with Strathfield Symphony Orchestra, conducted by Richard Gill. Davies would later use his woodwind skills on some tracks with his band Icehouse, playing oboe on several albums and adding cor anglais to “Man of Colours”, the title track of their sixth studio album.

In July 1975 Davies released his first single, “Leading Lady” on the RCA label.

In early 1977, Davies was working as a part-time cleaner at a squash court managed by bass player Keith Welsh’s mother. Davies and Welsh got together to form the band Flowers. In 1977, Davies re-established an old acquaintance with Cameron Allan, the director of Sydney-based independent label Regular Records, and Flowers signed with the label in early 1977. And in 1980 their debut album Icehouse containing the song “Can’t Help Myself” reached the Top Five, making it the highest-selling debut album in Australia. To take advantage of this success, the band changed its name to Icehouse in 1981. The name was taken from a cold flat Davies lived in and the strange building across the road populated by itinerant people.

In 1983, Davies with Icehouse went on a European tour with David Bowie.

In 1985, Davies and fellow Icehouse member Bob Kretschmer worked on the ballet Boxes with the Sydney Dance Company. In addition to scoring the ballet, they also co-wrote the script with Graeme Murphy. Boxes opened at the Sydney Opera House in December, and Davies performed in an acting/singing/dancing role to sold-out crowds for three weeks straight.

1985 also saw Davies win an APRA Music Award for Most Performed Australasian Music for Film for Razorback. Davies was an early adopter of the Fairlight which he used to compose the music of the film. His score has been described as “pioneering” and “an important contribution to Australian film scoring”.

In 1988, Davies and co-collaborator John Oates won an APRA Music Award for the Icehouse song “Electric Blue” (from the Man of Colours album) in the Most Performed Australasian Popular Work category. On 25 January 1988, Icehouse performed “Electric Blue” at the Royal Command, New South Wales Bicentennial Concert in front of the Prince and Princess of Wales at the Sydney Entertainment Centre.

Davies currently lives in Whale Beach, New South Wales. He married Tonia Kelly in 1990, then principal dancer at the Sydney Dance Company, but divorced in 2010. From the marriage he has two children, Brynn (born 1993) and Evan (born 1996).

In 2003, Davies travelled to Los Angeles to record the soundtrack to the Peter Weir film Master and Commander: The Far Side of the World with Christopher Gordon and Richard Tognetti. Together, they won the 2004 APRA/AGSC Screen Music Award in the Best Soundtrack Album category.

The Australian Songwriters Hall of Fame was established in 2004 to honour the lifetime achievements of some of Australia’s greatest songwriters.

In 2005, Davies scored the mini-series The Incredible Journey of Mary Bryant. On 6 November 2006, he won the 2006 APRA/AGSC Screen Music Award in the Best Music for a Mini-Series or Telemovie category. From 15 June 2008, Davies was a judge on Seven Network TV series Battle of the Choirs; his band Icehouse performed “Great Southern Land” on the grand final show won by University of Newcastle Chamber Choir.