By Alan Taylor

WHY, John Updike once wondered, has "the very brilliant, very Australian novelist Peter Carey, chosen to live in New York City?" Perhaps, reasoned the very brilliant, very American writer, it was to gain "the exile's significant artistic advantage of enhancement through distance, isolating his homeland from the eroding clutter of ongoing experience".

Perhaps. Then again, perhaps not. As it happens, I first interviewed Carey in August 1991 on the publication of his fourth novel, The Tax Inspector, set - as were its predecessors - in the land, as described by DH Lawrence, that no man had ever loved. Carey was then 48, a wiry, geekish, urgent individual, his hair tousled like an unfinished bird's nest, whose replies arrived before my questions were out of my mouth. His debut novel, Bliss, had been described as "remarkable" in the days before hyperbole was a Pavlovian response to anything new in print. His next, Illywhacker, was Joycean in ambition and execution and filled Angela Carter with "wild, savage envy". Next came Oscar And Lucinda, the first of Carey's two Booker Prize triumphs.

In the space of a decade he had gone from literary ingénu to international superstar. "Only novelists believe people do things for one reason," Carey said then, reflecting on his American exile. "In real life there's always 10 reasons." Today, aged 64, he still lives in New York, in SoHo, actually on Broadway, Manhattan's carotid artery, and says that moving was never really to do with writing: "I've lived in all sorts of places, and for all sorts of reasons, mostly to do with relationships, and I've written in all sorts of places, and it's been interesting enough."

For Carey, the portability of his profession is one of its most appealing aspects. But while he has enjoyed playing the itinerant, the locus of his fiction has remained Australia, that country which Europeans insist is young and which the Aboriginals believe existed before the very concept of time. Carey grew up in Bacchus Marsh, a small town near Melbourne, which has featured sporadically in his fiction, sometimes, one feels, because it's convenient and familiar, at others out of unalloyed affection. For while he may live in the US, Carey's love of Australia is undimmed.

In his latest novel, His Illegal Self, the two principal characters, Che and Dial, make the journey Carey has made in reverse, fleeing New York and its huddled, supplicant masses for Queensland and a dippy hippie commune which lies to the north of Brisbane. It is 1972 and Nixon is bombing Laos and Cambodia. Che is eight years old and living with his rich grandmother on New York's Upper East Side. When Dial turns up out of the blue, Che assumes she is his long-lost mother and transfers his affections to her wholesale. Dial, however, believes she is simply doing a favour for his real mother, "a prodigal daughter" who is on the run from the FBI. But what she blithely thinks will be the briefest of encounters turns into an inescapable nightmare. The story is told from both protagonists' viewpoints and their fluxing emotional states, the need of a child to invest hope and trust in an adult and a woman's inherent, maternal sense of duty.

For Carey, His Illegal Self represented an opportunity to revisit a period in his life when he was sublimely, incontinently happy. As in the novel, it was the early 1970s and he was in his late 20s, a sympathetic socialist, into alternative lifestyles and angrily opposed to the Vietnam War, living with the woman who would become his first wife.

"Unlike Dial and Che, I loved it," he says of the jungle of tropical Queensland. "It was like living in paradise, apart from the police who were very bad and corrupt. No-one ever asked you what you did. And that's a very light and lovely thing. No-one ever said, What do you do?' You were there, that's what you were.

"And at a certain stage this American guy arrived. He may have been from Texas but I'm not sure. We knew he didn't know where he was because he'd been there a week and he started planting dope plants in his front driveway in the middle of the bush. It was a source of amusement to everybody because he obviously thought he'd come to the end of the Earth, and that he was off the map.

"Well, he wasn't off the map. And then about a year later or whenever it was, the police - they continually harassed us - came and there were helicopters and cars. It was before dawn. It was the full works. They arrested this guy. He was wanted for conspiracy to import cocaine to the United States from Mexico. But we never asked him who he was. He was one of us, so we looked after him to a limited degree.

"Through whispered conversations, he told us he wanted to know from his lawyer, who was in Galveston, Texas, should he tell the Queensland police his real name. So we get whole heaps of 20-cent pieces - I used this in the book - and go to these remote places and try and ring the United States, which you can't do. He was a moron in many ways."

The relish with which Carey tells the anecdote reflects the brio he felt when writing His Illegal Self. "I was unreasonably happy writing it," he says, entombed in a cupboard-sized room at his London publisher's Bloomsbury HQ, and through the fog of a hangover. It was as if he were dying, he adds, and his life was flashing before his eyes. "I was in love with the memory of the place."

Memory, the novelist's ore, is not something Carey prides himself on, even though he is drawn to locations embedded in his past. His parents had a car dealership, which gave texture to his novel The Fat Man In History. The family lived above the spare parts department. Meanwhile, outside were the cars waiting to be sold. "My father," he once told me, "would stand at the window in his pyjamas at 3am, looking out the window and worrying about the cars he had to sell."

Bacchus Marsh was a mainly working-class town and the local school reflected that constituency. When the boys reached 14, they'd stand up and get ready to leave. "Where are you going?" the teacher would ask. "I've turned 14 and you can't f***in' touch me," the boys would reply. Then they'd go and get all their teeth taken out to save them bothering with them later on.

Within that milieu, the Careys were rather posh. His mother was the daughter of a country teacher and his father, having left school at an early age, was determined to do the best by his son. Thus, in 1954, he was sent to Geelong Grammar, Australia's equivalent of Eton, which a decade later would feature on the CV of Prince Charles. For Carey, the change in circumstances was dramatic and traumatic. Everyone, it seemed, had double-barrelled names and could pronounce "castle" correctly.

Interviewed by the Paris Review, Carey recalled that it cost £600 a year to send him to Geelong, an "unbelievable" amount of money in those days, adding: "I suppose it did solve a few child-care problems. I never felt I was being exiled or sent away ... No-one could have guessed that the experience would finally produce an endless string of orphan characters in my books."

That thought occurred to Carey while he was writing His Illegal Self, another novel about a boy who is, to all intents and purposes, orphaned. In the past, Carey has described Australia as a country of orphans, people who for whatever reason have been separated from their parents and their homelands. "Our First Fleet was cast out from home'." The older he's got, the more he has come to appreciate why he does some things repetitively.

"I realised pretty much 10 years ago the reason I had all these orphans was probably because I went to boarding school aged 10 or 11 and went from one class to another, and had to start life all over again, and how in my fiction I always created orphans. I always thought it was to make things easier because to invent a family was hard. It never occurred to me that this was the birthmark of a trauma. But I think the reasons that one does things - I don't think it's very helpful for the writer to know about some of them. In New York the unexamined life is the only one worth living for a novelist. It gets reductive otherwise. I'm not interested in self-expression. I'm really not."

Rarely, for example, has he been persuaded to write about his own experience. In 1995, however, he wrote a piece in the New Yorker in which he described how, in 1961, he accompanied the young woman who would become his first wife to have an abortion. In those distant days, as Carey recollected, Melbourne's bars closed at six, the White Australia Policy was still in force and you could be arrested for reading Ulysses or having an abortion. With £50 from a benefactor, an abortionist was found and the baby was "lost". Nearly a decade later, and now married, his wife fell pregnant again. And again the child was lost, this time through miscarriage. But what Carey and his wife did not know then was that "more babies would die before this story would be over". The next pregnancy ran its course and twins were delivered. But they lived only for a short while. As he stood and watched them in the oxygen tent Carey could not believe they would die. "Will they be all right?" he asked the nurse. "Oh, no," she said. "Oh, no." Later, when asked in the funeral parlour by his mother-in-law if he wanted to give the dead children names, he said he did not. "Are you sure you won't be sorry?" she asked. If he was sure then he is not now. "I wish only that we had honoured those children with a plaque," he wrote. "I will always wish that, forever."

When the Twin Towers came crashing down Carey was moved to write personally again. He was living in Greenwich Village with his second wife, Alison Summers, and two sons. He never walked the few blocks to Wall Street to look at what had happened, though his wife, who was shopping in a discount clothes store in the World Trade Centre, came close to getting caught up in the carnage. He was "bullied" into writing about it, he says, by Robert McCrum, his friend and former editor at Faber, who wouldn't take no for an answer.

"I just thought it was bad manners to go and look. I wrote that against my good sense but I did write it. I left out bits of stuff which were personal, but it was true, and," he pauses, "I rather disapprove of myself for having written it."

Really? "Maybe it was useful. I'm not sure. If it had any use in a utilitarian sort of way that's fine. The general thing is that it was her story. When everyone was calling me I said I'm not going to write about it. I kept putting them on to her, so she could write about it, which she did. That was fine. Then Robert kept insisting and I finally gave in."

The piece was couched in the form of a letter to McCrum and reflected the awful shock of the moment. "Only when I read her own account," Carey wrote, "do I appreciate the extraordinary escape she has made, how lucky we are to have her alive." Later he and his elder son walked up to Union Square and mingled with the crowds and cheered the firefighters. "I am reminded of Dunkirk," he wrote. "I am moved."

Five years later, and after 20 years as a couple, he and Summers were no longer together, a parting made all the more painful because of the headlines it engendered. Gleefully it was pointed out that where Summers had been fulsomely acknowledged in dedication to True History Of The Kelly Gang, for which Carey was awarded his second Booker, she was conspicuous by her absence in Theft: A Love Story. Moreover, Summers very publicly accused Carey of using his position as a novelist to vent his spleen on her, pointing to numerous similarities between him and her and two characters in the novel, usually to her detriment.

"It's emotional terrorism," Summers told one interviewer. "Say if he really believed I was this hideous person, and he couldn't resist the idea of using what he had learned about some hideous person. He would be free to make that hideous person into a great-aunt, or a child, or a salesman, but the minute you make that person into someone that is noticeably like the wife of the author, then people are going to go: Oh God, that looks like his ex-wife.' We the readers are being directed to believe that the author's wife is like this. We are being manipulated to believe that Alison Summers is like this."

It is an argument for which Carey has little sympathy. To be sure, there is a character in Theft who could be compared to his ex-wife, and someone who superficially has things in common with him. But there it ends. Examples, however, are legion of writers who have been accused of mining their personal lives to stoke their fiction, and today, readers appear to have difficulty in distinguishing between fact and fiction, memoir and novel. Inevitably, novelists use their own experiences and could avoid ignorant speculation by writing about them directly, without camouflaging them as fiction. That Carey chooses not to suggests he has a higher ambition than base revenge. "I'm never thinking about myself," he says. "I try and make something beyond myself. At the end of the day, of course, one is oneself and one is limited by oneself."

For all the heartache Theft caused him it reaffirmed his love of Australia, to such an extent that he was desperate to return to it, at least in his imagination. As with a lot of exiles, the remembrance of the place he abandoned lingers like a lost love. "I thought it was paradise when I lived in places like that," he says. "Paradise! Beyond belief! And I also think that people make so much fun of hippies and so on but really, essentially, they were right and they're right in the world we're living in now."

In the US, Carey is one of the dwindling few happy to call themselves socialists. Not long ago, he was on stage with the American writer Norman Rush, who pronounced that socialism was finished. "Say, Norman," asked Carey. "How long do you think socialism's finished for? Five years? Ten years? Fifty years? A hundred years? A thousand years? I don't know what you're talking about. Socialism is f***ing finished! Jesus!" He is praying that Obama beats Clinton to the nomination and goes on to take up residency in the White House. "He's a black man in America. He got to be a pretty tough f***er, no matter how charming he is." And, it suddenly occurs to me, much the same could be said of Peter Carey.

His Illegal Self is published by Faber, £16.99