Australia's attitudes to race have been spotlighted this week after a YouTube video was posted on a French tourist being racially abused on a bus. The woman was told by one passenger to "speak English or die". She was then threatened with stabbing by a second man. The video has gone viral, and opened up a debate in Australia about levels of racism. But any discussion of what the video says about race relations in Australia, shouldn't be done without context.

I grew up in a racist country. When my parents emigrated to Australia in 1975, the indigenous population had only had the right to vote for eight years, while the first Aboriginal Land Rights Act was still a year off. The White Australia policy, which restricted non-white immigration, had only been abolished in 1966, leaving a population which was almost exclusively white.

Those members of society who were not white – again, the indigenous population – were to have their racial characteristics "eradicated". This was to be achieved, in part, by the forced removal of indigenous children from their parents – the "stolen generations" – to be placed in "foster care", a policy that was only completely abolished in the 1970s.

This was racism in its purist form – one race was seen as being superior to the other, with the "inferior" race to be eliminated. For a shamefully long period of time, that was government policy. Whiteness was seen as natural, and I can remember my surprise as a child when a Chinese couple – "little yellow people" – moved in next door to our suburban house. That they were both doctors but it didn't preclude the necessity for speaking slowly to them.

They were to be pitied rather than feared, although the term "yellow peril" was in vogue as Australians looked north, saw the growing population of south-east Asia and looked at the vast amount of spare land we had. That Indonesia or China would one day invade was a background threat in my childhood in the same way that nuclear war was. It would happen, the question was when.

In part this was a hangover from the sheer oddness of the foundation of "Australia"– a European nation and ethos transported to a country in the middle of south-east Asia. The surroundings were threatening, the indigenous population – its culture, lifestyle, appearance – completely alien, and the sense of isolation (24 hours on a plane, still, now) constant. Questions of identity were present from the very beginning, and are still part of mainstream national debate.

Since then Australia has lived through governments progressive and regressive in their policies on race and the debate about national identity has remained central. Immigration and indigenous rights remain core issues in any election.

Throughout all of this, and despite its reputation in the rest of the world as being a hotbed of racism, Australia continued to talk about itself as a beacon of tolerance – citing the Australian notion of the "fair go" – and an example to the rest of the world of true "multiculturalism".

There is a fundamental truth to these assertions. Australia has never really managed to cultivate an extreme right-wing political movement, despite dabbling several times. It has, often despite itself, absorbed a wide range of nationalities and cultures and extended its definition of itself to accommodate them. Once incorporated, these new values are – rightly or wrongly – defended as stoutly as those of their European antecedents. It is possible to imagine an Australia in 200 years time which is predominantly Asian and which has arrived there through negotiation. But the negotiation will be, on past evidence, tortured.

What is fascinating about the video on the bus was not the incident itself – frankly every country has its share of "idiots" and, of course racists – but the general reaction in the Australian media and wider society. The debate was immediately framed as being about race, despite the equally offensive sexism in the video, and condemnation has been almost total across the political and social spectrum.

But one is left to ponder whether the condemnation would have been so absolute if the victim had not been a white European, which has therefore precluded any need for a debate about the threat of the other and if she had not been a tourist, in a country where tourism is one of the main planks of the economy. This is, in a sense, a safe debate about racism – an open and shut case that requires no deeper level of analysis.

It is revealing that all discussion in the Australian media has asked how the footage will be viewed "overseas". The true test will be if Australia finds a more complicated example of its deep ambivalence over identity going viral. Isolation is now an act of will, and an almost impossible one to sustain. Australia, in this new age of interconnectedness, is watching itself being watched, and is very worried about what is being seen.