In May 2014, a modestly budgeted horror film about a character in a children’s book that comes to life and scares the bejeezus out of everybody – especially the audience – slithered into Australian cinemas. It cost just over $2m and played on a small number of screens. Some critics murmured it was rather good, but it made tuppence at the box office and disappeared as quickly as it arrived.

Then something strange happened. The film – director Jennifer Kent’s spine-chilling debut The Babadook, an experience so brilliantly insidious watching it feels like ingesting slow-acting poison – became an international sensation. The Brits loved it (in its opening weekend in the UK the film made more than double its entire theatrical run at home). The Americans loved it. The French loved it.

Horror stalwarts such as Stephen King and William Friedkin dished out gushing accolades. “Deeply disturbing and highly recommended,” said King. Friedkin, director of 1973 classic The Exorcist, went further: “I have never seen a more terrifying film.”

The manner in which The Badadook achieved success – snubbed locally and embraced abroad – crystallises the take-home message of Australian film in 2014: that international audiences loved them and Australian audiences didn’t see them.

Facebook Twitter Pinterest The Babadook – an experience so brilliantly insidious, watching it feels like ingesting slow-acting poison. Photograph: IFC Films/Courtesy Everett Col/REX

Kent’s creepy crawly ultimately made its way out of the red, but plenty of other quality releases won’t. This story of Australian cinema is both exciting and sobering. It’s about how artists can do everything right from a creative perspective and still land with a crash and a thud and no measure of success by the conventional metrics (the box office). It’s also a reminder that the cream doesn’t necessarily rise to the top, and anyone who suggests big crowds is a measure of artistic worth can be rebuffed with one word: Transformers.

In the same week that The Babadook opened in Australian cinemas, the Cannes film festival lauded Rolf de Heer’s new film Charlie’s Country. The veteran Dutch-born writer-director received rave reviews and a standing ovation. More significantly, star David Gulpilil, whose slip into alcoholism and crime gave De Heer the impetus to make the film (partly based on the actor’s life) won one of their highest accolades: a best actor award in the Un Certain Regard section.

Gulpilil’s performance is so compelling, so utterly and profoundly humane, so full of near-indescribable charisma, looking into his eyes feels like a part of yourself is looking back. It’s hard to write about it without slathering the screen with superlatives. International critics encountered the same problem. Screen International called it “mesmeric”. Hollywood Reporter said it was full of “stirring soulfulness”. But when Charlie’s Country opened in Australian cinemas ... well, you know where this is going.

There are many other examples just like The Badabook and Charlie’s Country. In 2014, a large number of Australian films – 13 in total – were selected to play at five of the world’s most prestigious festivals (Cannes, Sundance, Berlin, Venice and Toronto). And while tumbleweeds often rolled through Australian cinemas when they screened Australian films, trade publications published a steady stream of stories announcing yet another Aussie feature had been bought by an international distributor.

These films aren’t a collection of hoity-toity releases intended for audiences who only eat fig and pecan choc-tops and debrief afterwards using words like “aesthetic”. This was also the year the Australian film industry revealed it had truly embraced genre film-making. Critics of the local industry often claim our funding bodies are bogged down in same-same thinking and have a default position of green-lighting morose dramas.

Josh Lawson’s directorial debut The Little Death is a kinky romantic comedy. Photograph: PR

But when it comes to genre films you’d be hard-pressed to find another year in history in which the Australian cinematic slate has been so vibrant and diverse. Genres covered in 2014 include time travel (The Infinite Man, Predestination), police drama (Felony) and police thriller (The Reckoning), apocalyptic (These Final Hours) and post-apocalyptic (The Rover), romantic comedy (The Little Death), action/heist (Son of a Gun), horror (The Babadook) and historical epic (The Water Diviner).

How appropriate, then, that one of the first Australian releases of 2014 was Wolf Creek 2, a sequel to the film that reignited genre film-making in Australia almost a decade ago.

More on this topic:

• Feature: what’s wrong with Australian cinema?

• Aussie science fiction is making a comeback

• Can big money, big crowds revitalise Australian film?

• Classic Australian films rewatched – weekly series