There you sat there on the hard seats of the SFX centre, with the remains of your sandwiches in a paper bag under your seat. You'd come straight from work to the theatre at half-past five and some five hours later, you were still there watching the same play. It was a recipe for theatre festival disaster but instead, Cloudstreet became one of the biggest successes in the festival's history. Night after night, audiences sat open-mouthed as the story of the unfortunate Lambs and Pickles, two white trash Australian families forced to live in the same house, unfolded. Boats flew across the stage. Fish Lamb nearly drowned and hung, jerking and twisting in mid-air in a twist of perspective that left most people gasping for breath themselves. Actors grew from obnoxious three-year olds to heartsick adults in front of your eyes. Ironically, given that most people's only knowledge of Australian drama was a hodge-podge of The Flying Doctors and Neighbours, Cloudstreet was soap opera, but, as enthusiastic critics of the show in London and Zurich pointed out, so are Middlemarch and Anna Karenina.

Cloudstreet inspired instant worship from its audiences - in Australia, fans have been known to fly thousands of miles just to catch one performance - so a lot of attention will be focused on The Small Poppies in the Tivoli Theatre, this year's theatre festival outing from the same team, Company B Belvoir and its artistic director, Neil Armfield. At first glance, the forecast is a little worrying: The Small Poppies is billed as "a play for families" and its subject matter seems small, local and far-removed from the satisfying universals of human nature explored in Cloudstreet. It's the first day at school for five-year-old Clint, who has to deal with bullies, making new friends and not knowing where the bathroom is: "I have to laugh when I think of the difference in scale of the two productions" says Neil Armfield. "The Small Poppies is like aspects of Cloudstreet as performed by five-year-olds."

So why did Company B choose this particular production to follow up such a huge international success as Cloudstreet? The answer has much to do with the long-standing working relationship between Armfield and actor Geoffrey Rush, renowned for his Oscar-winning performance in Shine, who takes the part of Clint in The Small Poppies. While working together on a production of The Marriage of Figaro in Brisbane in 1998, they started to think about the piece they would perform in the Sydney Festival in the year 2000, essentially the first play of the new millennium, performed on January 1st. "We wanted something that was optimistic without being simplistic; something that expressed a beginning."

Rush thought of The Small Poppies which he had commissioned from children's dramatist, David Holman, when he was director of the educational Magpie Theatre in Adelaide in the mid-1980s: "Geoffrey had always wanted to play Clint himself," says Armfield. "Clint is a kind of a five-year-old Hamlet part. He has this moral dilemma which no one else can resolve but himself.

As for the audiences, Armfield reckons the best performances have been in front of a mixed bag of children and adults: "It's a very little world but the emotional reverberations are profound . . . I always feel anything I do should be as clear to a five-year-old as to a 75-year-old".

Those reverberations are sent echoing by the relationships that spring up between Clint and his new friends, Lep, a Cambodian refugee and Theo, the son of Greek immigrants, and his eventual moral dilemma is entirely bound up with Australia's tangled cultural history: "When David wrote The Small Poppies he wanted to reflect the kind of extreme multi-cultural variety of Australia," says Armfield.

"At that time, there was a huge influx of refugees from Pol Pot's regime who had arrived here with extremely traumatic experiences, often having made a heroic and epic journey to get here, and then found themselves in this strange and sunny land of Mr Whippy vans, where the people were stuck between some memory of England and a television reality."

In Cloudstreet, the house shared by the Pickles and Lambs is haunted by Aboriginal girls mistreated in the past and this becomes a metaphor for Australia itself. It's clear that Armfield doesn't shy away from bringing a crusading conscience to drama: "Everything is connected. You tell a story that is as strong and beautiful as possible because if you smell a lesson you turn off. But if you can mine an emotional level, people will make the connection themselves. Drama works best when it shows you your own life."

Company B is a theatre company with a distinguished and quirky history. It was formed in 1984 when the Nimrod Theatre, a former tomato-sauce and salt factory beloved of the arts community in Sydney, was threatened by property developers. Some 500 of the arts community, including Rush and Armfield, each contributed £500, bought the theatre and created Company B Belvoir as the resident company.

That founding ethos is still strong today - everyone from the box office staff to the stars gets paid the same hourly wage, which is quite something when you consider the calibre of the actors who have worked there: besides Rush, Company B actors include Cate Blanchett, who last year returned to play Ophelia, and Richard Roxburgh, currently making waves in Mission: Impossible 2.

"Like the Almeida in London, it's the kind of theatre that actors return to hang onto their craft. The parity of wages sets up an interesting sense of purpose. Everyone who works there, is there because they love it."

That sense of devotion is echoed in the audiences who Armfield reckons come to the Belvoir Street theatre because "they know they will be confronted with humanity on the stage, with moments of extreme theatricality and great emotion." As artistic director, he places an emphasis on "earthy, gritty classics" which he attempts to stage in a new way, as well as on Aboriginal drama: "The theatre is apparently built on the performance ground of the Eora people and Company B is one of the theatres in which the Aboriginal theatre community feels comfortable". It's a formula which has found approval with the larger Australian theatrical community - the tour of Cloudstreet was financially supported by Baz Luhrmann, Nicole Kidman and Jane Campion.

That tour, to Zurich and London en route to Dublin, was immensely satisfying to Armfield, who admits that he had great ambitions for the work.

"It was what I hoped would happen . . . I've worked for this theatre company all my professional life and over the last 15 years I've worked with the same artists again and again and seen a kind of energy spring up. I always hoped we would create something that would travel, something that wasn't just a pale imitation of what was happening in Europe but something that was unique to this place."

The Small Poppies is at the Tivoli Theatre October 4th and 5th, 9th, 10th and 11th at 6.30 p.m. and October 6th, 7th, 12th, 13th and 14th at 8 p.m. There are matinees on October 7th and 14th at 2 p.m. and on October 11th at 11 a.m.