SYDNEY -- Only two decades after the Canberra government officially abandoned the long-standing "white Australia" policy by opening the doors to an influx of nonwhite, non-European immigrants, the demographic face of Australia is changing dramatically.

Twenty percent of Australia's 16 million people were born in another country, and Asia now leads Europe, Africa, North America and the Middle East as the largest source of new arrivals.

The tide of predominantly Asian immigrants, however, has provoked new challenges to the open-door policy, as Australians debate whether they can cope with the prospect of rising racial tensions, cultural disparites and economic retrenchment on their continent.

Australia's political institutions and traditions remain largely British, from the raucous parliamentary sessions in Canberra to the corner pubs and greasy chips shops in Sydney's city center. But immigration has altered the country's national character, giving it a cosmopolitan flavor, redefining Crocodile Dundee's stereotypical outback "Aucker," and leaving Australians searching for a new national identity.

"Look in any car on the freeway and you'll see an immigrant's face," said Suroosh Najmi, a Pakistani taxicab driver who said he moved to Australia three years ago to escape religious persecution. "In Sydney at least, there are very few pure white Anglo-Saxon Australians left."

At Cabramatta high school in Sydney, only a quarter of the students speak English as a first language, and 25 percent of the pupils practice Buddhism. Unlike other immigrant groups that landed in the Cabramatta district and moved on, the Asians show signs of staying. The district now resembles a miniature Saigon, boasting Vietnamese shops, restaurants and specialty stores and billboards in Chinese characters.

Immigration, particularly nonwhite, has traditionally been an explosive issue, but Australia has managed the task without major upheaval. Cabramatta -- the district and the school -- in many ways stands as the country's model of its relatively painless process of integration.

Analysts, academics and average "Aussies" say their country's success lies in a generally high degree of tolerance, born from the recognition of the need for this vast but largely uninhabited country to "populate or perish," in the words of one prime minister.

Australians also say they accepted the immigrants partly out of the desire to shake off the British colonial heritage that many here consider oppressive.

Another major factor in the immigration success is that Australia, like Canada, has allowed its immigration policy to be guided by the concept of "multiculturalism," which encourages new settlers to maintain their distinct cultural identities.

But that policy has raised controversy in the immigration debate, with critics claiming that massive government subsidies to ethnic organizations discourage assimilation and amount to political payoffs. An article in the respected Bulletin newsweekly last year described "how the bloated ethnic industry is dividing Australia."

Immigration helped fuel the country's economic boom in the 1940s and 1950s. But now, with unemployment high and the country bracing for a tough period of economic retrenchment, many here are questioning whether there might be limits to the tolerance.

"Immigration is largely responsible for Australia's post-war economic prosperity," said Cabramatta principal Brian Loader. "But immigration tends to be challenged during periods of high unemployment."

Melbourne University historian Geoffrey Blainey said until 1970 Australia's immigration program was in some ways one of the most successful ever carried out.

"The difference for the last seven or eight years is that we're bringing in people from vastly different cultures, they are coming in at time of high unemployment, and they are being put into areas of high unemployment," said the outspoken Blainey. "It might give rise to racial and social tensions."

When Blainey first raised his criticisms two years ago, claiming that large numbers of Asians threatened Australia's traditional democratic institutions, he was dismissed as a racist and demagogue. But his views became the focus of an intense national debate here over just how much is enough in immigration.

Blainey's views seem contradicted in a recent study by the Committee for Economic Development of Australia, which found that immigrants actually have a positive effect on Australia's economy in the short term because they "have higher labor force participation rates and are prepared to work longer hours in order to establish themselves in their new country."

The study also found that immigrants may actually create new jobs because they tend to be heavy buyers of consumer products. "The often claimed view that immigrants take jobs away from Australian workers was not substantiated," the report summarized.

Some immigrants, taking a somewhat less scientific view of the issue, seemed to agree with the report's findings. "European people work hard, the Vietnamese and Chinese people work hard," said Franco Paraco, a janitor and taxi driver who came here from Italy in the 1960s. "Australian people, they don't like to work hard. They like to lie on the beach and go surfing."

The shift to a larger Asian influx reflects Australia's desire to become less of a European nation in Asia and more of an Asian partner.

Hard-hit by falling prices for its commodities and beset by high unemployment and poor exports, Australians are increasingly reorienting their trade and aid toward their Asian neighbors.

As part of its new "Asian initiative," Australia also has tried to raise its foreign policy profile in the region. Foreign Minister Bill Hayden has immersed himself in the issue of Vietnam's occupation of Cambodia, among other regional issues.

The effort to move Australia closer to Asia has had mixed success. Trade overtures led to a mild tongue-lashing from Singapore's prime minister, Lee Kuan Yew, who chided Australia for still relying predominantly on Europe and the United States for trade. Australia's humanitarian initiatives for Cambodia led to a scolding from Thailand not to undermine the common anti-Vietnam front.