London, New York ... Sydney? Donatella Versace is heading for the new fashion capital, says STEPHEN TODD
It was a light, white, cotton shirt. Perfect for a patio party in one of those inner-city Sydney apartments that seem to have shimmied off the pages of Wallpaper* magazine. Ideal for a simple drinks do thrown in my honour on a recent return to Australia. Driiiing... the first guest arrives. "Hey, great to see you! Love the bias-cut white muslin chemise. Comme des Garcons, right?" Driing, driiiing. "Welcome back - oh, nice Comme shirt!" Thud, thud (we're well into cocktail hour...) "Hey man, wow, Comme, huh? Wow."

Like the man says, wow. Not so long ago, capital-F fashion would have gotten you capital-B beaten up in the land of plenty. Fashion, cobber, is just clobber, just something you put on to cover your modesty (and, when we learnt better, our delicate skins from the sun's cancerous rays).

Fast forward to the end of the millennium and Sydney is being hailed in glossy magazines as a mecca for style, the "young Los Angeles". The new Fox Studios has upped the stellar ante. Next year's Olympic Games are creating excitement. Even the rumblings of the Republican movement are giving Australia a new sense of her own identity. And now fashionista with a twista, Donatella Versace is opening a squillion-dollar terazzo palazzo on Queensland's glitzy Gold Coast, replete with 205 rooms and - say the people at Versace confidently - four of the biggest hotel suites in the world.

So what happened? Why is "Australia style" slipping off the lips of the rich and famous? Has Nicole Kidman's accent rubbed off on all those free Dior frocks? Did Cate Blanchett's Elizabeth finally prove that we, too, can look good in a bit of beading and a 6ft ruffle? Maybe. Or maybe the sheer determination of a handful of designers is finally starting to pay off.

Collette Dinnigan is Queen Bee. From her humble beginnings hand-sewing knickers for friends while laid up in hospital for months, she has turned herself, and her lacey, sexy, super feminine finery, into a tenable global business. When she realised that the antipodean market just wasn't big enough, she packed a suitcase with the kind of goodies girls go gaga over, and hit the road. Dossing down at friends' apartments (she'd pack her own Vegemite), she gradually built up a solid client base including big-name New York and Asian department stores, as well as Liberty, Harvey Nichols and Browns in London.

Naturally, the other inmates started looking at the accolades Dinnigan was bringing home. "Australian fashion" no longer seemed an oxymoron. People began to sit up and smell the sewing machine oil. "Frock designer" became a viable career option, where before bank teller, car mechanic or media tycoon seemed the ways to go.

The launch of Australian Fashion Week was important. Five years ago Simon Lock came up with the idea and most people scoffed. A few too many 'roos loose in the top paddock, they whispered. But Lock wouldn't be stopped. A spin doctor who'd swallowed his own medicine, an entrepreneur who could talk louder and faster and with more hyperbole than anyone else, Lock managed to convince government and industry and even a young designer or two that, yes, they too, could make a mark on the international fashion calendar.

Joan Burstein, the influential owner and buyer of Browns, is excited by the new talent coming out of Australia. "I'd expected to find lots of fabulous sportswear and swimwear, but in fact that's not what caught my attention at all. There's a different spirit entirely. A way of conceiving fashion that is obviously linked to the easy-going lifestyle of the place."

"Cross-cultural cooking" is how Sydney boy Akira Isogawa describes Australian style. "The light is very strong here to explore and use colours in fresh ways. The landscape is so diverse, from beach to bush, from pebble and rivers. Australia enables you to explore opportunities and allows you to be free from traditional backgrounds."

Akira's intricately printed silk dresses have been snapped up by Browns. Burstein has also bought in labels Eastern-Pearson, who work out of India, producing delicately beaded stuff. And Tea Rose for evening wear. Dinnigan is still a best seller.

Karen Walker is tipped to be the next best thing, with her sharp, modernist aesthetic. And then there's the sexed-up styles of Wayne Cooper, all edgy, frank, devoid of unnecessary ruffles and frills. Sexy while not overtly sauvage (we're talking Sydney, not Sao Paolo, here). Urban, but never too far from one of those exotic beach havens. You can take the design out of Australia, it seems, but you can't take Australia out of the design.