You grew up in a very unusual background, as you put it, in the middle of nowhere...

Yes, there was eleven houses on the main street, and that was the entire population...

It was very far away from Hollywood, and very far away from making films. What kept you going?

Even now, I don't really think of myself as a film director or an opera director of a music producer. We've even done the odd election campaign, which I'm really proud of... and we won! But I still do now what I did then. My father was, like, activity-crazy. He was scared that in such an isolated place we'd miss out on opportunities. So we had to try a musical instruments, do theater and play boxing, it was great. We had all sorts of things to do, and it was oftentimes too much. But with my father, it wasn't anything he said to me, he was just "like that."

Then I started to get my friends together, we'd put up a sheet (behind us) and we had a story. Then we started to do film. So all these projects and all these forms. And we owned a gas station, and as a 10-year old, I even had my own little radio station. And by the way, this was a gas station where we all had jobs for accidents. I've seen many people die; because it was by a small bridge and cars would zoom by. So when they had accidents, we all had our jobs to do. Eventually it was so dangerous they bulldozed it and put a four-lane freeway through it. So this rich fantasy life, and even what seemed like reality to me was a little fantastic.

It was like a little island, and everyone from gypsies to ordinary folk on holiday, even the Bee Gees came in once. And to all of them your invisible. So, I've always had a fascination with people. So I'm sure of all this has come from that...

Do you think there is a strain of theater in Australia in a certain way, one in which Strictly Ballroom sort of revived? We here in the United States don't really have directors who also do operas, yet (Australian filmmaker) Bruce Beresford does opera, and you have the Sydney Opera House. What is it about Australian culture that breeds it?

I look at it at a microcosmic level. There's a town outside of Melbourne, Australia - and I'm not kidding - all the best opera singers come out of this town, and they're all guys. And it's a small little goldmining town, it's tiny, but it happens to have an old theater in it and a very enthusiast music teacher. So much like this little town on the edge of the world, we in Australia know we are on the edge of the world. And we look out at the rest of the world through film, through television, through song, through culture.

All of us travel like maniacs. When you turn 21, it is standard to get your ticket to go "OS." The word "Overseas" is peppered in our language. You know, we consume more magazines than any other country in the world. So I think that if you're obsessed with the movies, with television, with music, it is a great way to travel, so to speak. And these forms are our way to "escape" Australia. And I don't mean that in a negative way. It's a means to not be limited to that country, because it is a very small one. Culture is very important. In Australia, we have one opera, which is very expensive (to upkeep.) And they did a survey across the country on whether the government should stop funding it, and the outcry was immeasurable. We must have an opera. Like my father, he was very, very worried that we'd lose the appreciation of the finer things, the things we live for, the things that make life rich. So perhaps you get a bit over intense about it.

Do you think there is some great irony here? That we have the first musical nominated for Best Picture in 20 years directed by an Australian, you have a Cannes award-winning musical directed by a Dane, and now Francois Ozon's 8 Women just won the audience award in Berlin. All these musicals, and all directed by a non-American?

I think you're right, and you're getting at something really interesting. The whole art of the Oscars, of old Hollywood, it is really revered. I know Martin Scorsese and I admire him like anyone else. Taxi Driver, amazing. It deals with psychological drama, and it's fantastic. And he even did his own musical, New York New York. And without Martin Scorsese, The Red Shoes would not even be heard of in this country, no one would even know it exists.

But what I'm really saying is, without that distance, that reverence for that culture, that art form and the ability for musical performers to express themselves in that way... that really is what Hollywood is if you're not from here (the United States.) You really expect to arrive here in Hollywood and everyone's on soundstages and dressed like they're at the Brown Derby. (Laughs) but then you get here and you realize it's just Hollywood - lots of work goes on inside sheds, but it's an illusion, at least that part of it.

When casting Strictly Ballroom and Moulin Rouge!, was it hard to get the cast to commit to this kind of heightened reality? Was there any resistance to entering this world?

It's actually a lost craft to play high comedy and high tragedy. Katherine Hepburn plays high comedy. You want high tragedy, you get Greta Garbo. It's absolute reality, it's truth, but it's truth with some degree of heightened focus on it. You're expanding the human condition. It's not about cinema verite, the minutia of life, like observing through a keyhole. You're amplifying it a little bit, and it's not just about it being "big" and therefore not real.

It's an incredible craft, and I've worked with every kind of actor, and I can tell you there are not that many actors who can do it. Who can play tragedy at that level and make it real. It's much easier to find an actor today who plays a carbon copy of Marlon Brando and mumbles the pain and suffering. But to get a young actor to stand, look in the camera, and sing "I love you!" without a touch of cynicism, that is hard to find.

There has been much debate over the expressive stylistic approach you took on Moulin Rouge! and many polarized reactions. To be honest, the first half of the film was just too much for me. Yet, my 12-year old niece, she loved it. Do you that speed, that density, that you achieved, that that is required to connect to today's young audiences?

Ahhh, that's an interesting one. It is true, we really pushed the editing of that first 15 minutes. Again, the naturalistic version of Moulin Rouge! is wide shot, music, then title "Moulin Rouge." And then, "Starring Nicole Kidman, also starring Ewan McGregor..." You're getting information, but you're really waiting for the movie to begin. But in this film, we challenged that. It's like "Wake Up! Participate!" Hopefully, you've got the popular, wondering if you're niece should be seeing this? (laughs) Should you stay, or should you go?

But it's interesting. You'd think George Sydney, who's like 90, wouldn't be able to handle it. And actually, who's really got it, is Stanley Donen. And he's not a pushover. He's a man of opinions, and he doesn't need to dance. And he said, "Baz challenges our notion of rhythm. He challenges our notion of pace." Even Spielberg said the editing was "courageous." Because you're quite right, we're pushing the boundaries where those who think they know what they're in for and are asking questions. And then when I start letting you off the hook about 15 minutes in, it becomes very classical and slows right down. The reverse would be to start slow and get faster; ours starts faster and gets slow.

Having said that, some people, well, they like Westerns, they're never gonna get it, I respect that. And it's not like I say, "Oh, you haven't watched it properly, you have to see it again." But it is true that the people who found it all too new on first viewing, some of them are the people who really connect and get it on second viewing. And editing is not a precise science, because undoubtedly it's left some people behind...