The essay investigates the representations of madness in the short fiction of two Australian literary icons, considering them on the background of the ambivalent historical and cultural specificities of a (former) settler colony. In this context the issues of “place/displace-ment”, “identity”, “otherness”, “belonging/un-belonging” are further problematized by the destabilizing liminal position of a country trapped between its filiative relationship with imperial power and its struggle to free itself from the European legacy. Considering displacement as a centrifugal process ingrained in the history of Australia, madness as an ex-centric physical and psychic condition appears to be enrooted in the colonial past of Australia as a “schizoid nation” with a “doubled form of consciousness”(Hodge and Mishra, 1990). And yet, the recurrent literary representations of dis-located identities can be considered as a strategy of resistance to, and contestation of, a fixed centre of discursive and political power, and as a means of re-appropriation of a marginalized identity excluded from European hegemonic formations of the self. In both Lawson’s and White’s stories madness becomes the metaphor for a problematic, non-conforming, struggling identity that does not accept to be stereotyped into an anonymous “Other”, thus acquiring the meaning of a subversion of the “reasonable” and the “normative”. The world of imagination and folly in which Lawson’s and White’s characters seek refuge in their mental derangement represents indeed a challenge and a threat to the over- emphasized importance given to rationality and pragmatism in the construction of an Australian national, central, authority.