“I’m kind of ashamed to admit that,” says Toby Martin, as he confesses to his ignorance of the culture of Sydney’s western suburbs – or, more specifically, Bankstown – prior to the making of his second solo album, Songs From Northam Avenue.

“I thought it was a ‘multicultural’ suburb. I thought it had good food. That it had a diverse population. That it was a traditionally working-class suburb. That Paul Keating, the Waugh brothers and the Hard-Ons were from there. That the Daily Telegraph loved to kick it and its Arab-Muslim population whenever they didn’t have anything else for a front page.”

In 2013, Martin, who occupies a special place in Australian indie-rock folklore thanks to the four albums he made as singer and songwriter with Sydney’s Youth Group, was approached by Bankstown-based performance curators Urban Theatre Projects to take part in a residency program at homes and businesses on Northam Avenue, a pleasant suburban street in southern Bankstown. Martin, along with a coterie of visual artists, writers and choreographers, was only required to “hang out and be in the neighbourhood. It was really just a space to think for two weeks”.

Yet the project snowballed for Martin, with Northam Avenue and its surrounds proving such fertile ground for songwriting that what was initially intended to culminate in a performance at Bankstown: Live (as part of the 2015 Sydney Festival) has become a unique LP that not only showcases that familiar compassionate songwriting style and gently penetrating melodic gifts but features a group of musicians, recruited by Martin, that reflects the diversity of the Bankstown community. Infusing the songs with a distinctly Middle Eastern feel are the sounds of an oud, qanun and mijwiz, as well as the Vietnamese dan bau and dan tranh. Also contributing are Holly Throsby and Sarah Blasko, along with Martin’s Youth Group bandmate Cameron Emerson-Elliot.

“Part of the project for me was realising that these suburbs are the most interesting parts of Australia,” Martin says. “Energetic, lively, open to new things. White, mainstream Australia is pretty ignorant of the depth and diversity of its own country.

“It had never crossed my mind that there were these amazing Vietnamese concerts or Lebanese singers. My milieu had been inner-city, indie-rock.”

While Songs From Northam Avenue can be seen as a celebration of community and that most polarising of buzzwords, “fusion”, Martin describes it as one of his darker records, confronting as it does racism, unemployment, domestic violence and even pyromania – themes not inspired specifically by life in Bankstown but by general issues that represent “the kind of drama I am drawn to”.

As on his 2012 solo album Love’s Shadow, Martin eases his way into the minds of fictional troubled souls to explore various social ills from their point of view, most beautifully on Central City Plaza, a song about a youth searching for his mother (albeit one, as the lyrics reveal, with a swastika tattoo on his neck). It’s a trick he says he learnt from Randy Newman, who is able to “assume the role of quite unlikable people with an authorial voice that is really shaky”.

For Love’s Shadow, Martin was inspired by the writings of Helen Garner and Lorrie Moore. Always able to cast a literary eye on his characters and situations, Martin did not have to look far for similar influence for this project, given western Sydney’s literary renaissance in recent years. He points to Luke Carman, Peter Polites and particularly Michael Mohammed Ahmad’s novel, The Tribe, as having a bearing on Songs From Northam Avenue.

“The Tribe made me think about the type of stories that could be told about western Sydney. It combines fiction and memoir in a very alluring way for a songwriter.

“But these writers are writing as insiders. I would really not want to be interpreted as anything like an ‘authentic’ voice of western Sydney. I come at it as an outsider looking in. I am certainly not trying to speak for anyone who lives in Bankstown. These characters could have come from anywhere in Australia really, and they are very much based on my own life and my own imagination.”

Indeed: Martin, who now lives in England and works as a lecturer in popular music at the University of Huddersfield, credits his detachment from and ignorance of Bankstown’s culture, his parachuting into the community via the Bankstown Line (the orange one), as one of the main reasons for his enchantment with the area and the residency, as well as this sad, wistful, thought-provoking album.

“Doing a residency is a bit like a holiday really and when on holiday you’re more open to the pleasure of everyday life. More open to the poetry of interactions, to the poetry of moments. So just talking to people, going to the shops, watching traffic, becomes imbued with a slightly magical feeling.”

• Toby Martin’s album Songs from Northam Avenue is out now. Edited on 22 February to add: Toby Martin will launch Songs From Northam Avenue with a live performance at Carriageworks on 29 April