Freud was born as Colin Joseph McGlinchey to Joe and Hannah McGlinchey and grew up in Melbourne, Australia. His interest in music began before he started school. "From the time I was five, I realised that was what I wanted to do. My uncle gave me all Frankie Avalon records and I just loved them. That was it, that was all I wanted to do". His father left the family when Freud was in his early teens. He attended St Thomas More Catholic Boys College in Vermont South (now part of Emmaus College).

Despite Freud's passion and musical talent, his mother, Hannah, was against the idea. He later changed his name to James Randall Freud. At the age of 17, Freud left to pursue his career and did not contact her for over two years. "We didn't communicate in any way until I could validate myself as a musician".

Freud formed his first band, Sabre, at the age of 16, with high school friend and guitarist Sean Kelly and drummer Ian McFarlane. Their first performance was at his younger sister's slumber party. After hearing the Sex Pistols' song "God Save the Queen" in 1977, Freud formed The Spred with Kelly, and three other members. Formed late in 1977, Teenage Radio Stars was a glam-punk band with Freud on lead vocals and guitar and Kelly on guitar and vocals. When the opportunity came to record a single, "I Wanna Be Your Baby", later covered by Uncanny X-Men, two members were fired. Mick Prague and Mark Harvey joined the band and performed "I Wanna Be Your Baby" on Countdown.

By early 1979, with ex-members of Colt, he formed James Freud & the Radio Stars with Murray Doherty on bass guitar, Roger Mason on keyboards, Glenn McGrath on drums and Bryan Thomas on guitar, and later Tony Harvey playing guitar and Mick Prague on bass. This line up plus various guest artists recorded the album Breaking Silence between July and November 1979, with Tony Lugton and Peter Cook contributing before the completion and release in 1980. The former Colt members, Murray Doherty, Glenn McGrath and Bryan Thomas went on to form local Melbourne band Mod Cons and added vocalist/guitarist Derek Beautyman in 1980. Later, Tony Lugton (ex-Steeler) replaced Harvey on guitar and also provided keyboards. Further changes by year's end resulted in Freud and Mason joined by Peter Cook on guitar and backing vocals and Tommy Hosie on drums.

They signed with Mushroom Records and their debut single, "Modern Girl," from Breaking Silence was released in May 1980, which peaked at No. 12 on the Australian Kent Music Report Singles Chart. They supported British singer-keyboardist, Gary Numan on his Australian tour. James was also originally going to be Numan's support band for the UK leg of the Telekon tour (Teletour) but was dropped and Nash the Slash was given the slot. James Freud & the Radio Stars' debut album Breaking Silence was released in June, it was produced by Tony Cohen.

Breaking Silence impressed Numan such that he offered to produce an album for Freud in the UK. Because there was already a British band known as the Radio Stars, a name change occurred for Freud's backing band, who became known as James Freud & Berlin. In October, they released "Enemy Lines" from Breaking Silence. "Automatic Crazy", produced by Numan, followed in March 1981. However, neither Freud nor Numan were happy with the London-recorded album and it was not released. One month later Freud disbanded the group.