The frontier that provides the setting for John Hillcoat's hypnotic, unflinchingly pitiless new film is so barren and scorched, it makes most American western plains look like something out of a vacation brochure. The Proposition takes place in the Australian outback of the late 19th century, and if it isn't the only Aussie oater ever made, it is at any rate the only one that matters.

Based on a brilliant, bare-boned script by the rock musician Nick Cave, the picture tells the story of a British officer determined to civilize a remote, dust-choked settlement and the deal he strikes to do so with a member of the hellhole's most brutal outlaw outfit. The movie opens with a chaotic shootout between Captain Stanley (Ray Winstone), leading his ragtag militia, and several desperadoes from the notorious Burns Brothers gang. This follows the shocking massacre of a local family. When the smoke clears, two of the brothers are shackled and seated across from the soldier in a room riddled with holes.

One is Mikey Burns (Richard Wilson), the youngest of the three. The other is the middle brother, Charlie, played by Guy Pearce, so gaunt he's all but unrecognizable from roles in films such as L.A. Confidential and Memento. Winstone, who gave such an unforgettable performance in Sexy Beast, delivers an even more mesmerizing one here as a displaced Brit desperate to prove to the locals he's a match for the bad guys.

He puts forth what he deems to be a cunning proposal: December 25th is nine days away. If Pearce rides to the secret hideout of his older brother Arthur (Danny Huston) and murders him, the two surviving Burns boys will be pardoned. If he refuses or fails, young Mikey will hang by the neck until dead on Christmas Day.

Arthur, we learn, is the big fish, the brains of the outfit. If Stanley can bring him down, he believes, the gang's reign of terror will come to an end and his brand of English law and order will gain credibility in the eyes of the townspeople and native aboriginal population.

It's a place Sam Peckinpah might have dreamt up on some really bad acid so, as cold-blooded as the plan sounds, it makes a kind of frontier sense. Unfortunately for all involved, the slimeball mayor decides his poll numbers could use a boost, and butts in. Over the protests of the captain, he orders the prisoner to be publicly whipped within an inch of his life. From the moment the boy collapses in a pool of his own blood, the flesh of his back shredded, it's clear there's going to be hell to pay. A darkening sense of dread moves in like a storm front. "This will be our death sentence," Winstone whispers to his wife.

Martha Stanley is played by Emily Watson as a woman who's mastered the art of pretending she's somewhere else. Her surroundings are so inhospitable to life as she's known it that she might as well have relocated to the lunar surface. Yet she holds it together by planting improbable rose bushes, serving tea from an antique china set, and losing herself in fashion catalogues from the world she left behind. With savages like the Burns brothers to the left of her and the corrupt forces of colonial rule to her right, she's stuck in the middle with nothing but fantasies of her former life to keep her sane.

The standout performance in a film with outstanding performances to spare, however, is given by Huston. The son of the legendary director John Huston and half-brother of famed actress Anjelica, he came to acting relatively late in life, but has made up for lost time with memorable turns in Birth, 21 Grams and The Constant Gardener, among others. This is his best yet. His Arthur Burns is a transfixing combination of poet, seer, philosopher and violent psychopath. The actor underplays his monstrosity to riveting effect. Feared by the aborigines, who refer to him as "dog fella," he lives high up in the hills, stares into space for hours at a time, and leads a Manson-style family of Irish misfits and mental defectives. When Charlie arrives, Arthur tells him, "I know why you're here." Clearly, his brother wonders whether that just might be the case. Many in the audience will, too; Huston's portrayal is that convincing.

Miles away, a small evergreen has been uncrated and decorated. A formal table has been set with silver, crystal, wine and a Christmas bird. Captain Stanley and his wife sit in their finest formal attire, as though the occasion were a festive one and good company were due to arrive at any moment.

And company is coming, but it is bad company. Barred shutters and locked doors won't keep these visitors out. That rifle the captain has laid on a chair across the room might as well be on the other side of the world. Hillcoat lets the tension build until you think you might jump out of your skin, and then there is hell to pay, as we knew all along there would be.

The Proposition is written artfully and with restraint, acted so well you won't be able to look away, directed with just the right hallucinatory touch, and set to a haunting score that's a marvel itself -- Nick Cave wrote that as well. Maybe that's why the Western has faded into the sunset over the past several decades -- not enough rock musicians have been making them.

This is a movie about many things: loyalty, national arrogance, the bonds of family, the inescapably cyclical nature of retribution. It's also about as authentic, original and exhilarating an experience as you're likely to have at the cinema this summer.