The sun is setting over evening commuters on Broadway in central Sydney. Several businessmen turn off the main thoroughfare and find themselves suddenly taking showers in coloured light. One man is so enamoured that he drops his briefcase and begins stretching, collecting the wild swirl of reds, blues and purples along his arms. It’s like watching an impromptu gym session unfold in the garden of Eden.

“Are they flowers or birds?” the man asks his friend, squinting at the pattern.

“No idea, but you look like a big doll.”

The men have stumbled inside a new permanent public artwork by the Swiss artist Pipilotti Rist, Sparkling Pond, Bold-Coloured Groove & Tender Fire: a suite of floor projections and wall of coloured glass produced for the undercroft space of Park Lane, one of the residential towers in the Central Park development.

Facebook Twitter Pinterest Sparkling Pond, Bold-Coloured Groove & Tender Fire by Pipilotti Rist, a new permanent installation at Central Park in Sydney. Photograph: Mark Pokorny

Within the large, open-air colonnade, the work can be experienced between sunset and 11pm every night, and is inspired by the city’s lush vegetation. “With video you can open up walls and change architecture,” says Rist. “I want to use space to bring more people together. Under the lights people can meet, dance and speak.”

She says being physically immersed in the work “reminds us not only to use our eyes and brains but also to actively engage our entire bodies with temperatures of light and colour”.

Rist’s work is one of a number of new commissions that are attempting to change the experience of Sydney, as the central business district battles the eyesores and road closures of seemingly endless tramline construction and building development, and as the creative industries wage war against lockout laws and venue closures.

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It’s not always come easy: this week the construction of Cloud Arch, a Junya Ishigami-designed steel archway planned for George Street, was deferred until after the tramline is finished. Originally dubbed “the most significant artwork built in Australia in decades” by Sydney’s lord mayor, Clover Moore, the council blamed cost blowouts and obstruction by the light rail contractor Acciona.

“There has been a lack of cooperation and, in fact, we have been hampered in every way with this exciting project,” Moore said at a council meeting on Monday night.

First estimated at $3.5m, $2.25m has already been spent – with a final cost projection said to be $22m. “The reality is that this project has been an unmitigated disaster from the outset,” the Liberal councillor Christine Forster said, referring to the arch as a “ridiculous vanity project”.

Facebook Twitter Pinterest Tadashi Kawamata’s Big Nest, another public art commission at Central Park. Photograph: Mark Pokorny

The jump from $3.5m to $22m might seem to be a steep increase, but it’s worth comparing it with what the city spends on sport; demolition works on the Sydney Football Stadium will begin in January, with a new one to be built in its place at a cost of $729m.

Barbara Flynn is a contracted curator for the City of Sydney, and the woman responsible for commissioning Rist’s work. Over the last 12 years she has shepherded in some of the most significant public art in Sydney, working with artists, the government and private industry to shape the urban landscape. James Angus’s ellipsoidal sculpture Day In, Day Out on Bligh Street, Jenny Holzer’s neon column of text I Stay (Ngaya ngalawa) in Chifley Square, and Tracey Emin’s handmade bronze birds known as The Distance of Your Heart at the northern end of Bridge and Grosvenor streets are among her ambitious projects.

Her aim, she says, is “to assist artists to achieve their greatest works, or the work they have always wanted to realise. It is a pursuit of unrelenting perfectionism. It is not that the public is secondary, but the relationship with the artist is equally important to me.”

Facebook Twitter Pinterest I Stay (Ngaya ngalawa) by Jenny Holzer, a permanent installation at Chifley Square in Sydney. It displays text by Sally Morgan and Ruth Hegarty. Photograph: Brett Boardman

Flynn first encountered Rist’s work in 1998, and knew she was seeing something new. “Pipilotti is unique in her capacity to engage people. She engages in a direct way, through a universal language of forms. People flock to her work.” Rist’s Museum of Contemporary Art exhibition Sip my Ocean, and her show at New York’s New Museum before it, broke both institutions’ records for attendance.

Flynn and Rist first began working together on an artwork for Sydney’s public six years ago. This early effort failed but their partnership eventually led to Sparkling Pond, commissioned by Frasers Property – the kind of commission Flynn says most artists can only dream of.

For Rist, the work is much more than coloured lights. It represents her longstanding belief in art’s ability to foster social change. “On one side I want to treat the public space as a collective living room; on the other side I want to destroy the white space, make it less clinical,” she says. “The elites call colour superficial, associated with advertising, but I see it as part of the proletariat, which is less chromophobe because life is indeed more colourful than displayed. Only dead life loses colour.”

She hopes visitors immersing themselves in her work will feel cleansed, as the forces of capital are momentarily dimmed by windows on to our secrets and dreams. “We have a tendency to make necessity look like the good choice, and I hope I can give a small counter-force to that.”

On the importance of art to the city, Flynn says: “People don’t remain lukewarm to a bold work of art for very long. It becomes your own private icon, the thing you take people to see – what makes the city your city.

“Sydney leads the world in public art – and it is something to be very proud of.”