Driving down from Perth, you will know when you are getting close to Denmark because suddenly everything will be more beautiful. A warm sun glows over hills of vineyards and grazing cows, but it is set against a mysterious hue, a richness and a blackness, a feeling of swimming in an enchanted lake. It's impossible to resist being pulled in.

The shire of Denmark is a 30km-wide strip of giant trees and wild beaches in the south-west of Australia. Named after a friend of one of the region's first European explorers, Denmark has long been a farming district. In recent years, though, many people have come to the shire to live out their dreams, whether as artists, hairdressers, or stock brokers. So although just 5,000 people live here, there is a lot happening, including festivals and local fairs selling residents' inventions.

My first trip to Denmark was all about escape. After the heat and dryness of Perth, arriving in Denmark was calming and refreshing. I had a local guide who drove me around and claimed to be sharing his secret abalone-collecting spots: "I'm only telling you, yeah?" Fishing is a big part of the culture here and Wilson Inlet, which joins the town to the ocean, is the perfect place from which to sail a little boat, or pick mussels from the shoreline.

Locals sell olive oil and handmade knobbly wooden spoons. The Denmark Liquor Store, on South West Highway, stocks a huge variety of local wines – and has a charmingly cranky owner. These wines are crisp and interesting; less established than the vineyards of Margaret River a couple of hours away, the small producers here are experimental. Meanwhile, just outside of town, Bartholomew's Meadery makes ice cream and light table wines from honey.

Driving through the extreme south-west of Australia is like being in an car advert. The road is your own as you curve smoothly through forests up and down the valley. But the best way to appreciate the shire is to walk the Bibbulmun track, a fantastic 1,000km journey that starts in the Darling Range near Perth and changes climate as you head south and eventually finish across the southern beaches in Albany. In Denmark, the track takes you through the tingle tree forests, where the trees can be 16 metres in circumference and 40 metres high. Some trees struck by lightning are still growing and you can walk inside them.

The Gloucester tree, which used to be a fire look-out, is 60m high. Pegs jutting out from the trunk allow the fit and the fearless to climb right to the top. Much gentler is the Tree Top Walk, an ingenious walkway which allows you to gradually ascend to the tree canopy.

Denmark has backpacker hostels, B&Bs and Chimes – a luxury spa with private villas – but for those in the know, it is a place for luxury bush camping. It is wonderful to walk through a bush campsite under the moonlight, and there's great satisfaction to setting up and breaking down your camp – even if it's just for one night.

William Bay is a national park that has several of the best beaches in the area: you can walk between places such as Elephant Rocks, Greens Pool, Waterfall Beach and Madfish Bay. They're all good for swimming, snorkelling and scuba diving. You can surf, windsurf and catch your own fish from most of the beaches. The best time to go is early in the morning, when the water is calmest and clearest, or in the late afternoon for sunset.

But the best information about Denmark comes from the locals. Between Noakes, the general store that sells local produce, the holistic massage centre and the bakery there is always someone to approach.

You can rent a car or campervan from Drive Now (00 61 3 9809 0084; www.drivenow.com.au) and pick up in Perth or Adelaide to drop off one-way or return, from A$35 (£16) per day. Alternatively fly from Perth to Albany with Skywest (00 61 3 0066 0088; skywest.com.au) from $120 (£55) one way and rent a car from King Sound Cars (00 61 8 9841 8466; kingsoundcars@westnet.com.au). For camping, accommodation and touring, contact Denmark Visitor Centre 73 South Coast Highway, (00 61 8 9848 2055; www.denmark.com.au)