Twenty years after being dubbed "Bigots' Island", Tasmania is shaking off its reputation as a bastion of conservatism so successfully that it now seems more like Progressive Central. It looks set to be the first place in Australia to legalise same-sex marriage, and is considering a whole range of reforms that will make it one of the most liberal places on Earth.

The island state off mainland Australia was one of the last places in the Western world to decriminalise homosexuality. Mass rallies in the 1990s against repeal of the sodomy laws resounded to chants of "Kill them, kill them", and some politicians called for gay men to be whipped.

Last week, though, as the Australian federal parliament dashed hopes of a vote on the issue, gay rights activists in Tasmania expressed optimism that same-sex marriage would be legalised there before the end of this year. Last September, legislation was defeated in the state's upper house by just two votes.

Download the new Independent Premium app Sharing the full story, not just the headlines

Long regarded as a social backwater, Australia's southern-most state has blazed a progressive trail in recent times. A Bill to legalise euthanasia is expected to be introduced later this year. Sow stalls have been banned by the Labor-Green government, and battery-hen farming is being phased out – both firsts for Australia. There is even debate about banning smoking for people born after 2000. Tasmania, which finally decriminalised homosexuality in 1997, has also led the rest of the country in atoning for past treatment of Aboriginal Australians. Five years before the then PM, Kevin Rudd, delivered a national apology, the state apologised to the "Stolen Generations" of mixed-race children forcibly removed from their families. Its government is the only one in Australia to have paid compensation.

Tasmanians could be forgiven for pinching themselves, so radically have things changed in little over a decade. But they, too, have changed, according to opinion polls. In 1988, support for the decriminalisation of homosexuality was at 15 per cent below the national figure. Recent polls have found support for same-sex marriage to be several per cent higher than nationally.

Although 65 per cent of Australians favour legalising gay marriage, two private members' Bills were defeated in the federal parliament last year, and the latest draft legislation – introduced by a Green MP, Adam Bandt – will not be voted on until after a general election in September. That election will almost certainly be won by the opposition Coalition, led by Tony Abbott, a conservative Roman Catholic. Mr Abbott has so far refused to allow Coalition MPs a conscience vote.

However, Rodney Croome, the Tasmanian-based national director of the lobby group Australian Marriage Equality, believes the political climate is changing, not least because of New Zealand's recent legalisation on gay marriage and Britain's moves to follow suit. "In the case of New Zealand, there's an added rivalry because Australians don't like to be beaten by New Zealand, be it on the sporting field or in social reform," he said yesterday.

In Tasmania, the main obstacle remains the notoriously conservative Upper House, which in the 1990s rejected the Bill to decriminalise homosexual relationships six times. The same-sex marriage Bill – expected to be re-introduced in the coming months – will have a better chance this time, campaigners believe. They say constitutional issues – cited by some Upper House members who opposed it last time – will have been clarified.

"Because of Tasmania's past as the last Australian state and one of the last places in the world to decriminalise homosexuality, it would be a source of immense pride to be the first jurisdiction in Australia to achieve this," said Mr Croome.

The campaign to legalise homosexuality began in 1988, when activists set up a stall at the Saturday market in Hobart's Salamanca Place, collecting signatures for a petition. Every Saturday, Hobart City Council officials would order them to dismantle the stall. When they refused, the council would summon police, waiting in nearby vans, who arrested dozens of people.

Daily coronavirus briefing No hype, just the advice and analysis you need Enter your email address Continue Continue Please enter an email address Email address is invalid Fill out this field Email address is invalid Email already exists. Log in to update your newsletter preferences Register with your social account or click here to log in I would like to receive morning headlines Monday - Friday plus breaking news alerts by email Update newsletter preferences

With the Salamanca Market one of Tasmania's biggest tourist attractions, drawing thousands each weekend, the civil disobedience campaign won widespread coverage. A total of 130 people were arrested, including Mr Croome, who was detained four times. However, it was another decade before the state bowed to national and international pressure, which included condemnation of its laws by the UN's Human Rights Committee.

Those who welcome a more progressive Tasmania note that the seeds were planted long ago. In the 1970s, the state was the birthplace of modern Aboriginal politics, with protest marches leading to the recognition of Tasmanian Aboriginal identity and the burying of a century-old myth that the race became extinct in 1876 with the death of Truganini, the last full-blooded Aborigine.

It was also the cradle of the global environmental movement, with the world's first Green party created there in 1972. A place of pristine wildernesses and outstanding natural beauty, it was at the same time (and until very recently) the site of rapacious logging of old-growth native forests. To the outside world, Tasmanians were greenies or rednecks, although the reality was more nuanced. "If you look at the forestry issue, in particular, it's a battle for the Tasmanian soul, and that's what has underpinned politics here for a long time," says Cassy O'Connor, a Tasmanian Greens minister.

In recent times, Tamania's reputation as a cultural desert has been overturned, thanks to the Museum of Old and New Art (Mona), which opened in 2011 beside Hobart's Derwent River. Featuring the private art collection of a professional gambler, the multi-millionaire David Walsh, Mona has won international plaudits and boosted Tasmanian tourism, with 1,500 visitors a day.

Tasmanians now talk of a "Mona moment", symbolising the state's transformation. Ms O'Connor says: "When David Walsh built Mona, it was such an act of faith in this place, and in our identity and what we have to offer. I actually think Mona changed the way a lot of Tasmanians think about this place. Because suddenly the eyes of the cultural world were on us, and we have here in Hobart this amazing cultural institution of international value."

The Tasmanian novelist Richard Flanagan has a different perspective. In a New Yorker article this year, he wrote: "Of many misunderstandings Mona has given rise to not the least is that it is in sharp contrast to a Tasmania frequently misrepresented in mainland Australia as conservative. But it [Tasmania] is better understood as a place of extremes, radicalism and unreality, and Mona merely its latest manifestation."

Mr Flanagan said: "We've still got a pretty conservative polity, enacting backward, divisive and unnecessary policies." He cited the government's backing for a pulp mill in a scenic valley, its endorsement of mining in the Tarkine Wilderness area, and its insistence on building a motorway bridge across a riverbed north of Hobart despite the discovery of 40,000-year-old Aboriginal artefacts at the site. One factor often missing from the debate, he believes, is the relatively high levels of poverty and welfare dependency in Tasmania.

Advocates of same-sex marriage say it would boost tourism and the ailing economy. Mr Walsh is keen to host weddings at Mona, envisaging a Hotel Mona, or HoMo.