IT HAS been a question almost since the Australian film industry leapt back into life with Stork, Alvin Purple and Picnic at Hanging Rock in the 1970s: what sort of films should the country make?
Should our directors try to compete with Hollywood? Or given smaller budgets, is it best to make more ''culturally important'' films, even if they only reach limited audiences in art-house cinemas?
In recent years, ''cultural'' has mostly won out over ''commercial''. Despite a series of acclaimed films, most still only get small-scale releases.
It seemed the only way to break into mainstream cinemas was to make a bigger-budget film backed by Hollywood (such as Australia and the Happy Feet movies), a feel-good comedy (Kenny, Red Dog and now The Sapphires) or an adaptation of a best-selling book (Mao's Last Dancer, Tomorrow When the War Began).
The result: while 20 Hollywood movies have taken at least $10 million at the box office this year - the industry benchmark for success in this country - only five Australian films have done it in the past decade.
But the latest batch of local films suggests that is changing.
Four films, starting with The Sapphires, are getting Hollywood-scale releases in more than 200 of the country's 2000-odd cinemas.
This week, it was the comic TV spin-off Kath & Kimderella. Later this month comes Bait 3D, a tongue-in-cheek action-thriller about a shark terrorising shoppers in a flooded supermarket.
Then comes the black comedy Mental, which reunites the team from Muriel's Wedding - director P. J. Hogan and Toni Collette as a one-of-a-kind nanny.
And after two serious dramas, Lore and Dead Europe, there is another comic TV spin-off - Housos Vs Authority.
It seems Australian producers have learnt from Hollywood that ''familiar source material'', whether it is a hit stage musical, TV show or just an earlier film, helps find an audience.
Clearly, the government's producer offset - a tax rebate scheme to boost production - is allowing bigger-budget and more ambitious films to be made.
The chief executive of the film agency Screen Australia, Ruth Harley, says it has encouraged more commercial production without sacrificing cultural merit.
''We can't really steer the production because what comes in [for funding] is what comes in,'' she says. ''But what we have done is make it very widely known that we are very welcoming of films that have broad ambition.''
Dr Harley believes the new niche for Australian films is ''elevated art-house crossover'' - smart stories that work in both art-house and mainstream cinemas - as well as ''elevated art-house'' and ''elevated genre'' in the case of Bait.
The Hollywood-based Australian director Phillip Noyce, whose films include Patriot Games, Rabbit-Proof Fence and Salt, says it is encouraging to see these wider releases. ''It's always hard for a little Australian film to compete for awareness with Hollywood product that has already been sold into Australian hearts and minds by global culture platforms such as the web and the Hollywood publicity machine that feeds it,'' he says.
''Sometimes a film can find an audience but mostly the audience needs to be forced to find the film by the kind of saturation advertising that is necessary to support wider releases.''
While The Sapphires is already a hit - heading for at least $14 million - Hollywood is in no danger of being overtaken. Even with wider releases, the Australian share of annual box office is still likely to be less than 5 per cent this year.
Magda Szubanski - Spectrum