Australian author Madeleine Gray’s award-winning debut novel Green Dot was a smart, funny tale of a doomed office affair. Her new novel, Chosen Family, is a smart, funny tale of a complicated, life-changing relationship between two women.

Nell and Eve meet aged 12 at a girls’ school in Sydney. Gray’s narrative moves smoothly back and forth from the 00s to the present day; as in David Nicholls’s One Day, we learn about our protagonists by meeting them at different moments in their lives, from the pressures of high school to the alcohol-soaked freedoms of university to the frustrations and joys of early parenthood.

We are told at the outset that, although Nell and Eve have a young daughter that they coparent, Nell is no longer around – and her mysterious absence keeps us deeply invested in their story. What went wrong? Who betrayed whom? And can it be fixed?

When they first meet, Nell is a lonely kid with rich parents who give her their credit card details but not much else. She is resigned to being friendless until she meets Eve, a new girl with a flaky single mum. The two are instant allies, devoted to each other, but mean girls soon begin to circle. There are rumours Eve is a “lez”. Sensing social disaster, Nell cuts Eve loose to save herself.

Gray evokes the horrors of school perfectly – “there is something almost sublime about the cruelty of preteen girls; the absolute acid of it”. Without Nell, Eve is a solitary “ghost”. But when we meet Eve again at university, we see her coming back to life, making new friends (the scene-stealing Marcus and Tae) and beginning to embrace her sexuality. She Googles “how to look even gayer” before going to class and, on her first outing to a gay bar, asks if it’s acceptable to buy another woman a drink, or “patriarchal”.

Gray beautifully depicts Eve’s discovery of her new queer identity, showing how vital and exciting it can be to find a community. But even as Eve is revelling in the newfound joys of lesbian sex, she is careful not to let anyone get close to her. And when Nell comes back into her life – a subdued and apologetic version of her high-school self – Eve is both a magnanimous friend and someone acutely aware of the power of being a magnanimous friend.

Beneath their tentative reunion, other questions linger: what do they really feel for each other? Are they friends or something more? Were those school bullies on to something? The wounds that linger from their younger years come into even sharper focus when Eve suggests they bring up a child together as friends, using sperm donated by one of their gay male housemates (“Inseminate me, babe!”). Despite misgivings, Nell goes along with it.

Relationship novels typically use female friendship as a place where the characters go to discuss their love lives – a kind of narrative breakout area – but there is often an intensity equal to the “main” romances. Sally Rooney’s Beautiful World, Where Are You, for example, features long emails sent between two women, whose relationship to each other is arguably as compelling as the ones they have with men. Chosen Family explores that unspoken possibility: could a deep love between women be put at the centre of the story? Could it form a different kind of partnership, a new kind of family?

But alongside that runs the terror of losing your best friend if it all goes horribly wrong. Both Nell and Eve are obsessed with the story of Medusa. Nell becomes an artist and her work features images of the snake-headed gorgon’s admirers being turned to stone. The idea of being petrified – in both senses of the word – runs through the novel. Both women conceal things from each other because the stakes are so high.

This brilliantly sharp and readable book explores friendship, parenting, love, lust, self-deception and all the ways those things overlap. It reveals the cruelties we inflict on those we are closest to and asks if we might be able to find new, more honest, ways to love.