PALOMINO By Elizabeth Jolley Stanley Moss/Persea Books. 260 pp. $15.95

JUST OVER a decade ago, Elizabeth Jolley was an unknown Australian novelist trying vainly to sell the manuscript of Palomino, her first completed novel, to wary local publishers. A small press eventually accepted the novel but sat on it for several years before bringing it out in 1980. "They were bothered," as Jolley herself admits, "about the material that was in it," which focuses intensely upon a lesbian relationship and, tangentially, upon an incestuous one. Today Elizabeth Jolley is hot literary property: widely regarded as one of the best contemporary Australian novelists, she has published three collections of stories and six more novels, most notably Mr. Scobie's Riddle (1984) and The Well (1986), in which she has continued to write about unconventional lives with growing sophistication and originality.

Despite her American publisher's misleading blurb, it is well to remember that Palomino is definitely early Jolley. Readers already familiar with her work will not be surprised by the homosexual material, since it figures in almost everything she has written; and, since Palomino's originality inheres in its theme rather than its form, they may find it less interesting, as fiction, than Jolley's more experimental works, such as Miss Peabody's Inheritance (1984) or Foxybaby (1985). Yet, considered as a first novel, Palomino is remarkably assured and distinctive, stating clearly -- as in the statement of a musical motif -- the preoccupations which shape all of Jolley's writing: the fascination with loneliness, with "what people need and where they get the most understanding," and the rejection of social "boundaries" and the idea of the "normal." Despite her sedate, grandmotherly image, Elizabeth Jolley has been since the beginning of her career a profoundly iconoclastic writer.

Laura is close to 60, a former gynecologist and obstetrician who lives alone in a remote, narrow valley in Western Australia. There is some mystery attached to Laura, who has been barred from medical practice and seems to have spent time in prison. She is returning by ship from a trip to Europe, undertaken as an act of self-healing, since "suppressing thoughts of painful events {had} led to the suppression of all feeling." In the hot-house atmosphere on board (Death in Venice is screened daily, Mahler is in the air), Laura is attracted to a young woman named Andrea, whose fair hair and delicate prettiness remind her of the palomino horses she used to watch running in the fields at home. After leaving the ship, the two women meet by chance at a dinner party and Andrea, who is mysteriously unwell, is invited for an indefinite visit to Laura's farm.

Down at the farm, all is passionate awakening of dormant senses. It is spring, with "the promise of . . . acacias . . . , the fragrance which comes before you really see the flowers." Laura and Andrea listen to Beethoven, prepare vegetables, watch the palominos run. Laura tends to her vineyard and orchard, "just a small cultivation in a lot of land . . . the small changes a person on her own can make on the land." The two sleep together, make love, declare their passion, clearing in the jarrah forest (as in the thickets of social convention) what each sees as a fragile space of "grace and harmony and pleasure."

Ranged against this life of pure pastoral romance are images of that stultified, conventional married existence which appalls Laura and Andrea as irrationally as the idea of homosexuality appalls many married people. "These people," fulminates Andrea, "are like hundreds of others all the same as each other . . . Their friends are all clean too like these people are clean. Very clean. Clean clothes, clear hair, clean houses, clean swimming pools, clean cars and clean minds with nothing in them." Laura, less heatedly, agrees: "Mostly they are trapped before they realize it."

To Elizabeth Jolley's credit, the novel's view is larger and more tolerant: neither of these women speaks with the author's voice. A minor triumph is her creation of the Murphys, Laura's feckless farm-tenants, who fester away with their brood in a state of horrific squalor, ruining her enjoyment of the landscape. Yet Mrs. Murphy, who borders on real evil, is a comic gem, and by the novel's end even Laura has been forced to recognize that Mr. Murphy is that rarity, a genuinely good man.

In any event, there is more than one worm in the bud of this romance. With the help of such devices as diaries and letters, it gradually emerges that Andrea has been sexually intimate with her brother and is, in fact, pregnant by him and that Laura's tragic secret is possibly even more terrible, indeed criminal. As spring gives way to a suffocatingly hot and airless summer, the question becomes urgent: Can Laura's and Andrea's love survive these revelations? If not, what might such a failure mean in view of the oppositions set up within the novel itself? Is a life such as theirs, staked out beyond the boundaries, impossible after all?

Elizabeth Jolley has said that, although a large number of her characters are homosexual, she cannot describe her view of homosexuality as a celebration because in her novels -- as, she feels, in life -- so many of these relationships tend, distressingly, not to last. "It's often a very experimental, a very painful thing." On one level, the story of Laura and Andrea is merely the history of just such an experiment and, on another, an eloquent plea for understanding. "Surely," says Laura, "there can be no laws about love. Love like this cannot be a mixed up thing. It is so right. I am grateful for this, so grateful."

THERE ARE, however, two problems with Palomino. One is its implicit demand not only for understanding but for an acknowledgement that Laura and Andrea's life together is itself normal, as opposed to the often unnatural life of "suburban" marriage. Homosexuals may have relationships as normal or abnormal, as staid or as kinky, as anyone else, but it obfuscates the issue that in this particular case their banner should be carried by one woman who, in her past, may have been criminally insane and by another who is manifestly neurotic throughout the novel. The other difficulty is that much of the record of this romance is the kind of thing that should never see print, not because it is especially explicit but because it, well, gushes. It shrivels upon exposure to the air. "A delicate adventure in incredible tenderness" it may be, but by the end of the novel/experiment one feels that, like adolescent passion, it is doomed to collapse under the weight of its own poetic pretensions. It is possible that Elizabeth Jolley, who is a very intelligent writer, intended precisely this effect but, even so, one squirms. No novel, no matter how intelligent, can afford too high a squirm factor.

Nonetheless, admirers of Jolley will be grateful for Palomino, for the chance to see how consistent she has been and yet how far she has already evolved.

Elizabeth Ward writes frequently about contemporary fiction.