It is hard to argue with this when you look at this year’s Miles Franklin Award shortlist and see that all five novels on it are historical – and by ‘historical’ I mean not the generic bodice-ripper but any novel set in the historical past. Many, indeed most, of these novels use scenes from the past as a way of shedding light on the present, but they are still not direct engagements with the reality of our own lives in current Australia. The problem isn’t the presence of historically based novels, but the absence of the other kind.

Andrew McGahan’s Underground isn’t quite set in present-day Australia either, but it may nonetheless be the kind of book that Modjeska and Marr were hoping for. A quick canter through McGahan’s oeuvre suggests that he may be working his way through the genres: to date there’s been grunge, crime, the Gothic family saga; and in Underground he has tackled that difficult and forbidding genre, the dystopia. It is 2011 or thereabouts, and the Australia of this novel is at once instantly recognisable and utterly changed. ‘Undesirable aliens’ are walled up in urban ghettos, planes are crashed on purpose, people mysteriously disappear, and an organised underground resistance movement has begun to take shape as ordinary citizens lose more and more of whatever freedoms they may once have had. Inevitably, the ghost of George Orwell haunts this novel, not least in the shameless twisting of public language; what we currently know as the Department of Immigration and Multicultural Affairs, for example, has had its name changed to the Department of Citizenship, and the Australian Federal Police answer to the Minister for Freedom.

The narrator of this cautionary tale is Leo James, cheerful, dissolute, fifty-nine and a fully paid-up member of the Queensland white-shoe brigade, a burnt-out survivor of the irresponsible 1980s. He ought to be a repulsive character, so it is interesting that, by comparison with his twin brother, Bernard, he is extremely charming. Bernard is the prime minister, the second one after John Howard, whom he resembles closely in many respects. As the story opens, things aren’t too good for the Honourable Bernard James. The country is on high alert against terrorism, and numerous new laws have been passed in the name of national security. The army is swollen by conscripts and demoralised by the never-ending succession of small foreign wars. ASIO and the Federal Police have likewise expanded dramatically, and the country has been in a state of emergency for so long it is now regarded as normal. Identity cards, loyalty oaths and security checks are constants. Canberra has been ‘nuked’ and nobody is allowed to go there or to fly through its airspace. Osama bin Laden is dead. On the other hand, the things the press tells the country are not always the truth.

For all the bold strokes with which this story is told, and despite the straightforward and pragmatic voice in which the narrator tells it, the narrative is carefully managed. It is framed at the outset by Leo James’s last days, in which he is driven by boredom to write his ‘memoirs’. The story is addressed to his captors, and shifts chronologically back and forth around a few key events: 9/11; the American president’s visit in 2003; the televised mushroom cloud over Canberra; the Queensland cyclone from whose eye Leo is plucked by some kidnappers, thus beginning his days on the run.

This is an intermittently very funny book in which the humour of the satire tends to numb response to the large amount of sudden and violent death. But the ideas behind it are chilling, and so are the points it makes about what you’ll see if you pick up the paper or go out into the street when you finish reading this review, for most of McGahan’s futuristic Australia already exists. The humour is of a particularly Australian kind; Leo James may be a fat and seedy failed developer, but the chance to tell his story brings out his inner Paul Hogan. Underground is reminiscent of that great shot of the Australian soldiers in Oh, What a Lovely War (1969): laconic, sardonic, lounging around cracking jokes as the world goes to hell in a handbasket.

Critics were sharply divided about McGahan’s most recent novel, The White Earth (2004), and it seems likely that this one will have a similar effect. Part of the reason for this, I think, is that all of McGahan’s work challenges the already debatable ground between genre fiction and ‘literary’ fiction, and some critics don’t quite know where to have him, or by what criteria his work might best be judged. The story of Underground is told in simple language, a story of big bangs and primary colours, with outlandish, cartoonish characters and events. But part of the definition of a dystopia is that it is not realism; and part of the point of this book is that its events do happen on this explosive, larger-than-life scale. The book has the feral quality of good political cartooning, a willingness to caricature in bold strokes, to make laconically savage fun of solemn hypocrisies, and to go straight for the throat.

Underground is also rich in symbolism and suggestion, as in the wonderful scene where the fleeing Leo and his companions, somewhere north of Lake Mungo, stumble on a large and well-concealed marijuana crop, and are confronted by a couple of armed and deadly Aborigines who are about to shoot them when a little old woman in bare feet and a beanie materialises from between the plants and says, ‘That’ll do, boys’. Their response is plaintive: ‘Mum, we got it covered.’ Not only does she save them from her murderous sons, but she gets them safely across the river into Victoria.

In a dénouement that manages, by virtue of its unrelenting narrative logic, to be both hilarious and terrifying, we discover who, in a complex interlocking set of global conflicts, the real adversaries are: we find out who is really trying to keep whom in check, and why. Leo, during the period of interrogation and torture after he is finally captured, finds himself imprisoned inside Parliament House – specifically in the empty House of Representatives, which is no longer used for anything else. Leo’s last words are not funny at all, and recall the chilling line, ‘We have found the enemy, and he is us’.

David Marr, in his 2003 lecture, described Australia as ‘a country where mainstream leaders – not nutters from the far right – manipulate race fears to hang onto power, where political opposition has been tepid, indeed complicit, where the press is too often outwitted, the public service cowed [and] the military top brass outmanoeuvred’. So precisely does Underground address each of these issues that it is hard to believe that McGahan didn’t hear or read Marr’s lecture and draw some kind of inspiration from it. But the event that seems to have been the main trigger for this book was the visit of George W. Bush to Canberra in October 2003, when the Americans took over the capital – entry to Parliament House controlled by the president’s men; American film crews allowed in where Australian cameras were not – and the Australian government simply rolled over and stuck its paws in the air. There is nothing at all imaginary or invented about McGahan’s slightly stunned-sounding account of this day, via his narrator Leo:

Block off a mile-wide circle in the centre, and the city ceased to function ... Everyone could have put up with that if they’d at least known that Australian security forces were in charge. They weren’t. For that one day it was obvious to everyone that sovereignty of our national capital had been handed over to the United States.

For a novelist trying to work out the myriad technical problems of probability, recognisability, logistics and imagination that are posed by the writing of futuristic fiction, a setting in the very near future is both harder and easier: harder because your flights of imagination are more firmly tied to existing conditions; easier because much of your material is just sitting there in the daily paper, waiting for you to pick it up. Most of the separate elements of McGahan’s dystopian Australia are already in place.

And the truly fearful thing about a dystopia set in the near future is the way it can blend in so seamlessly with real life as it unfolds from day to day. A few chapters from the end of Underground, I took a break to check my email and found in it a press release from the Australian Society of Authors, containing an announcement that seemed to be a joke or a hoax but, alas, was not: it said that the South Coast Writers’ proposed poetry reading in the Wollongong Mall had been banned by the mall’s management, lest anyone should read poetry about politics or religion and thereby break the new sedition laws. Chatting on the phone that night to a friend who isn’t a big reader of fiction but knows a lot about the military, I mentioned Underground, told him a bit about it and suggested he might like to read it. I then went on to tell him about the ASA press release. To my slight surprise, he laughed.

‘Yes,’ he said, ‘that does sound like a book I’d like to read.’

‘No, no,’ I said, ‘this bit is for real. This is something that really did happen.’

‘Oh,’ he said. ‘Oh, dear.’