The other victims of the Bali bombing are the Balinese who are left behind

For several decades now Australians have flocked to Bali to enjoy a range of holiday pleasures. Collectively we've treated Bali as our own - our backyard playground, our affordable little slice of exotic island paradise. We've felt genuinely liked and welcomed by open-faced, smiling locals. We've felt pretty much at home.

The bombing at Kuta beach in October last year changed much of that. Notwithstanding a hard-won reputation for fearless and often reckless overseas roaming, many Australians are heeding our government's warnings against non-essential travel to places like Bali. The number of international tourist visitors to Bali, including Australians, is now way below normal.

I'd never been to Bali before that bomb. But recently I did visit, pulled as much by curiosity about what the murderous attack at Jalan Legian has done to the relationship between Australians and Balinese as by any marketing campaign using the pulling power of sun, sea and sarongs.

The last three I found aplenty, of course. There's still nothing like drinking cold Balinese beer at a warung (eating place) overlooking waves that attract the best surfers in the world to Bingin beach, and climbing up a rocky path to sleep in magical clifftop bamboo huts run by Mick from the Gold Coast or Jerome from Marseilles.

There's still nothing like finding your godspace (so I'm told) at a yoga retreat in inland Ubud, or washing down sweet black sticky rice with ginger tea at midnight, straight off a plane from Sydney. It's still hard to beat the joy of eating fresh lobster grilled with super-hot sambal at a beachside restaurant, watching brightly-painted fishing boats pulling into the markets at Jimbaran, before hopping on the plane back home. The flight full of just enough bikie blokes with tatts, bead-strewn anaemic hippy women and cheerful young suburban families to think that nothing much has changed in any of our worlds.

But, of course, there's also that empty space covered in scaffolding where the Sari Club and Paddy's Bar used to be. I went there because I'd been told, by my government among others, that it's my ground zero; the place to start finding the answers to questions about what is right and wrong, good and evil in this world "that will never be the same again". There was a lot of dust, which seemed impossible and unnatural in such heavy, humid weather. There was also a small and moving memorial pinned with letters to and photos of dead young people, Australian and Balinese. But I didn't find any galvanising sense of good or evil there. It just felt sad, surprisingly quiet and very empty.

I did find clear and present evil, though. It was hanging over the courtroom in Denpasar, during the hearing for the trial of alleged Bali bomber Amrozi Nurhasyim. The courtroom is a modest building that looks more like a school assembly hall in Cairns or Darwin than a place to hand down hard justice to terrorists. I turned up on the day Australian bomb survivors Jason McCartney, Peter Hughes and Stuart Anstee gave their emotional evidence against Amrozi.

Stuck in an impenetrable snarl of redirected traffic and heavy security on the way to court, I didn't hear what they'd said until later that night on the TV news. But when I did arrive, the air was still thick with the smell of the horror those men had lived through. It was written on the faces of the nakedly grieving families of Australian dead, and in the more private, contained anger of the many Balinese - presumably also including families of the dead - streaming toward me out of the courthouse. It was also there in the unusual, almost sullen tetchiness of Western journalists, filing their accounts of the day's events back to the safe living rooms of Australia.

This stage of the trial and my visit coincided with Galungan, the twice-yearly Balinese Hindu festival that restores balance to a world twisted by disorder, and celebrates the victory of dharma (virtue or truth) over adharma (evil). That's a beautiful, seductive notion in this globally anxious time of unpredictable and fundamentalist violence against civilian targets, and of divisive argument about how best to respond. Sitting cross-legged in a flower-strewn temple in a village on the lush green outskirts of Ubud (as the guest of Nyoman Lasya, a 37-year-old taxi driver with a quirky passion for badminton) watching a hundred golden brown arms raise frangipani blossoms in arching prayer, and receiving blessings of sprinkled water and rice, for a moment it was possible to forget some harsh realities.

In Bali today some local realities are very harsh, and hardening. Eight months after the bomb, at the start of what used to be peak season for overseas visitors, Bali's tourist centres and their dense infrastructure of hotels, restaurants, shops and services are clearly undersupplied with paying custom. I was the only lunchtime customer in a street of restaurants in Jimbaran eating anything at all, never mind the lobster. One huge five-star hotel in Kuta has already gone under - two more are hovering on the brink - and taken with it the jobs of hundreds of maids, cleaners, waiters, bellboys, gardeners, drivers and cooks. Businesses, large and small, have been forced to cut personnel and hours of employment. Two-income families now rely on less than one, if they are lucky. Villagers struggle to sell their homegrown fruit and vegetables. Times are tough, and if more tourist dollars don't start flowing into Bali soon - the economic wellbeing of 80 per cent of Balinese is directly linked to the tourist industry - many people will go hungry, many children will drop out of school, and this island society and economy will descend into acute crisis.

Asri Made, 41, a successful Kuta businesswoman, third-generation tailor and international director of the all-woman Rotary Club of Bali Taman, is taking practical steps to soften the brunt of this kind of poverty. She is on a one-woman mission to link up the poorest Balinese children directly with Australian sponsors - just $100 will pay for one year's schooling and another $100 will cover basic nutrition, toiletries and living essentials. Asri took the initiative having been frustrated by the failure of promised money from Australia to arrive to fund the delivery of primary health care following the bombing.

Former Canberra high school principal Judy Pratt, who is involved with the work of charity Yayasan Kemanusiaan Ibu Pertiwi (YKIP) that provides scholarship funds for Balinese children orphaned in the bomb, and whose husband Chris runs Bali's Australian International School in Kuta, thinks the situation is now more worrying than in the bomb's immediate aftermath. Then, she says, the Balinese were in a state of terrible shock and insecurity but viewed the situation as a temporary, if horrific, blip in the balance of their universe. The Hindu cleansing ceremonies held last year after the bombing, she says, produced palpable and hopeful relief among local communities, and the consistent counsel of peace from Balinese leaders has also had a calming effect.

One interpretation of the peace message from the banjars (village councils) of Kuta, Legian and Seminyak, printed on leaflets scattered on the tables of an Ubud café still frequented by Western devotees of vegan wholefood - and a cynic might say clearly pitched to that market - put it like this:

Do not bring malice into our world. What has happened has happened. Stop talking about the theories of who did this and why. It does not serve the spirit of our people. Words of hate will not rebuild our shops and houses. They will not heal damaged skin. They will not bring back our dead ... The overwhelming scenes of love and compassion at Sangiah hospital show us the way forward into the future. If we hate our brothers and sisters we are lost in Kali Yuga. If we can Love all of our brothers and sisters, we have already begun to move into Kertha Yuga. We have already won the "War Against Terrorism".

But now, says Judy Pratt, as the economic situation has deteriorated, especially in the last few weeks, she sees a growing desperation emerging against what she calls "a quiet background of anger". Like all painful emotion, this anger has to go somewhere. And like hurt people everywhere, the Balinese seem to be directing it, albeit quietly, as Judy notes, at the "other" they deem responsible for their suffering.

Who is this responsible "other" in Bali? Most obviously, they are the terrorists. A T-shirt worn by bicycling children on the Kuta-Ubud road was emblazoned with "F**K TERRORIST" in angry red letters. The "other" are Muslim Javanese. They are the alleged Bali bombers Amrozi, Ali Ghufron (Mukhlas) and Imam Samudra. And when Balinese spoke to me, as an Australian, of that October night last year - calling it, always with reverence, "the bomb", "the accident", or "the tragedy" - they made it very clear they wanted no part of, nor punishment for, whatever motivated that action. They urged me to go home and do something, anything at all, to communicate their great sadness for the Australians killed and for their loved ones. And their hope that Australians would return to Bali.

But what will happen if Australians - and Americans, Europeans and Japanese - do not return some time soon in large numbers, to spend hard currency pampering themselves in the day spas, boutiques and bars of Bali? Will there be a destructive collision of conflicting spiritual, cultural and economic imperatives in Bali, a new kind of ground zero? Will Balinese anger at their plight overspill into any kind of retributive violence? If so, against what or whom will it be directed?

Western expatriates and Balinese alike show unease at the instability of their foreseeable future on the island. The Australian International School has received a bomb threat in recent weeks; the police and Indonesian military presence on the streets is high, visible and visibly armed; the turmoil of Aceh lurks in the corner of many conversations; and when Balinese speak of Amrozi and his ilk, many flatly and frankly wish them dead. Many are also concerned about the Indonesian elections coming up in May next year, expressing disappointment and lack of confidence in Indonesian President Megawati Sukarnoputri. The perception that her leadership lacks necessary definition and strength at this volatile time seems widespread, even among her former supporters who say they expected her to deliver more for the "middle down" rather than the "middle up".

On my last night in Bali, Ketut Janna, the 30-year-old proprietor of a formerly bustling warung across the road from my hotel in Ubud (it is now empty; his workforce has dropped from 15 to three), spoke longingly of the days when he could drive into Kuta, "Bali's Bangkok", to taste the wealth, excitement and difference of the outside world. No uncritical slave to Western culture and capital, however, this marketing graduate also told of visiting California and being shocked at the grinding poverty of hard-working Mexican immigrants who claimed him as their own because of the colour of his skin.

"But you know, here in Bali, we do not think the colour of your skin is so very important," he said. I wondered about this, at the end of eight days of being most conspicuously white, wealthy and Western-and feeling a lot like a walking wallet. "What really matters," he went on, "is what goes on in your head, and in your heart."