WITH THESE two novels, Elizabeth Jolley is being introduced to U.S. readers as "an Australian writer," which she certainly is, insofar as all her books -- seven in the last eight years -- have been written and published there. But Jolley actually was born in England, grew up in a German-speaking family and did not even come to Australia until she was 36. Thus, her work is more relevant than most to something the expatriate Australian writer David Malouf has said, addressing Europeans, "If you are to be interested in Australian literature, it is not because it is some peculiar and exotic place like Africa, it is because it is another version of Europe which will tell you something about Europe." For American as well as Australian readers of Elizabeth Jolley, this is another way of saying that she has something to tell us about ourselves.

Over the last decade, Jolley has developed astonishingly as an artist. In many ways, all her work forms a closely-woven whole: characters, situations, images, even phrases, recur in book after book. But with these novels she moves beyond an early dependence on realism. If the hallmark of her writing used to be pathos, it is now irony, even fantasy, so beautifully controlled that the reader is ricocheted between the pitiable, the hilarious and the profound in a quite dizzying way. With the publication of Mr. Scobie's Riddle, in particular, Elizabeth Jolley joins the handful of Australian writers -- Patrick White being the most eminent -- of whom it may be said that their books are able to alter the direction of one's inner life.

Miss Peabody's Inheritance is a strange little story- within-a-story, treading the "too thin . . . line between truth and fiction" to memorable effect. The "real" character, Miss Peabody, is a lonely, middle-aged London spinster engaged in an improbable correspondence with a "real" Australian novelist, Diana Hopewell, about the novelist's work-in-progress. This flight of fancy stars a trio of gently lesbian ladies, a headmistress and her two companions, who undertake annual pilgrimages to London, Bayreuth or Vienna to indulge their furtive tastes in Wilde, Wagner and cold white wine. They "have reached that age when people give each other expensive pots of unusual jam or packets of cress seed to sow on sponges as presents." They are sad, pretentious and absurd. Yet how skillfully the reader is persuaded to "understand something of the real need (they) have in themselves, a need matching needs in other people."

So full of life are they, in fact, that Miss Peabody seriously attempts to track them down during their fictional visit to London. This suffices to stamp Miss Peabody as a doddering old eccentric until one remembers with a shock that she is herself imaginary. The novel successfully undermines our sense of reliable boundaries between what is real and what is not, introducing the original idea that there may be degrees of fiction in literature corresponding to levels of reality in life. It sets out to show, among other things, that "there are moments in the writing of fantasy and imagination where truth is suddenly revealed," and the fact that the writer may be the fictionally "real" Diana Hopewell or the really "real" Elizabeth Jolley is simply part of the whole philosophical conundrum.

Mr. Scobie is an unwilling and unhappy patient in St. Christopher and St. Jude's Hospital for the Aged. The hospital itself, a frightful place, is as much a character in Mr. Scobie's Riddle as its extraordinary crew of staff and inmates. Matron Price is kept busy tricking the senile patients into signing over their assets to the hospital. There is little to eat but junket, maggoty lentil stew, beetroot and burnt lemon sago. Old Mr. Hughes is left sitting on the toilet for six hours at a time. Raucous card games go on all night in the dinette, where Matron's own brother, a patient, always "lose very bad" and in the process is gambling away the hospital.

But there is no single voice in this may-layered novel. Not only is the ghastliness of the hospital inseparable from its atmosphere of saturnalian hilarity, and vice versa, but Jolley is capable of switching angles virtually in mid-perception, thus upsetting moral judgments.

"Mrs. Rawlings took the patients, one by one, as they were tossed from the bathroom and stuffed them into their clothes. She led them out, one by one, and stacked them on pieces of plastic, in cane chairs, along the verandah.

"Once safely in the chairs, it was peaceful, the voics of the doves sounding in the calm morning. To and fro the voices of the doves caressed the freshly washed row of old people. The hospital seemed, on these mornings, to be like a big tree with everyone resting in the branches."

Mr. Scobie's Riddle is not an expos,e of the plight of the aged, even less an attack on the inhumanity of nursing homes. Jolley's concerns are far from sociological. The question apparently uppermost in her mind is closer to the one put by Wordsworth to the old leach-gatherer: "How is it that you live, and what is it you do?" It comes as no surprise to learn that "Wordsworth was one of (Mr. Scobie's) favourite poets." One of the old man's famous riddles echoes the poet: "What do human beings do, what is it human beings do?" (Matron quickly puts him in his place, "'That's enough Mr. Scobie. We don't want anything disgusting,' she said.")

Mr. Scobie's helplessness is exaggerated by age, but is also seen as part of being, simply, human and so reminds us of our own helplessness. "What is it that we all know is going to happen but we don't know when or how?" he asks, profoundly upsetting Matron. In the midst of the "incredible noise" at St. Christopher and St. Jude's, Mr. Scobie plays over and over his cassette recording of Brahms's German Requiem. "Lord, make me to know mine end, and the measure of my days, what it is: that I may know how frail I am." Through the web-frail consciousness of Mr. Scobie, the whole novel is a kind of meditation on this text.

What Mr. Scobie and Miss Peabody and many other Jolley characters live by is the memory and hope of some private place of isolation, freshness and silence, perhaps home, perhaps not, but always, in the Wordsworthian spirit, revitalizing: "suddenly she is in the middle of (a) sandy pine-needly place, walking on a little beaten path. She feels refreshed by the dry lightness of the air and the clean comforting scent from the sun-warmed trees." Such things are not exactly solutions to the riddles, but are at least something to set over against the helplessness.

Mr. Scobie's Riddle, in my view, touches on greatness. But both these novels go aptly recommended by the novelist Diana Hopewell's own forthright self-advertisement in Miss Peabody's Inheritance. "The writing is packed, it is dense writing, emotions on several levels packed in. It is, I hope, a novel of existence and feeling. A reader can be as involved as he wishes and some readers will fight off this involvement. Don't worry. Read on."