Baxter Immigration Detention Centre sits on a narrow strip of road that intersects the highway looping around the top of the Spencer Gulf from Port Augusta to the Eyre Peninsula. It is enclosed by electrified fences and razor wire and isolated from the raw beauty of coastal mangroves and arid red plains by buildings that face only inward.

It is a sobering corner of remote South Australia, built on an old Army base solely to house illegal immigrants, overstayers and asylum seekers until their fate is determined: deportation, or acceptance as refugees.

For four months this was home to Cornelia Rau, a German-born Australian resident who had arrived as a toddler and worked as a Qantas flight attendant until claimed by schizophrenia. Desperately ill, ranting at guards, smearing faeces on walls and eating dirt, Rau was put in solitary confinement and remained there until last week, when her identity and resident status were confirmed.

During her time at Baxter, and in the previous six months she spent in a Queensland jail, Rau's illness was neither recognised nor treated. Nor were police or her family able to find her, despite being listed as missing and posted on the network co-ordinated by the Australian Federal Police's national missing persons unit.

Rau, 39, is now the centre of a political storm raging on four fronts: the failings her case exposed in Australia's mental health system, the national tracking of missing persons, the identification and treatment of mental illness in immigration detention centres, and the continuing controversy over the system of mandatory detention itself.

The incarceration of a mentally ill Australian resident in a prison for illegal aliens has appalled everyone, including the Government of Prime Minister John Howard, despite his refusal to apologise on legal grounds.

Howard has now ordered an inquiry, but its terms of reference and the decision to hold it in private have outraged Australians across a broad political and social spectrum, from distinguished mental health experts and human rights organisations to the Senate and the Labor Opposition, which continues to push for a full, public, judicial inquiry.

Professor Phillip Boyce, president of the Royal Australian and New Zealand College of Psychiatrists warned there could be dozens of Cornelia Raus lost in detention and denied access to appropriate professional help. Added Human Rights Commissioner Dr Sev Ozdowski: "From the circumstances reported, this shocking case only confirms ... that a law requiring mandatory detention of persons found in Australia, pending confirmation of the lawfulness of their presence here, is inherently unjust and is contrary to a person's human rights."

Howard conceded in an interview on Sydney radio station 2GB: "This case raises questions not only about the immigration detention system, which has attracted all the critical attention, but it also raises some questions about the mental health policies that this country has followed for a long time."

Rau's story is tragic, complicated by a severe illness that nonetheless confounded police, immigration and German consular officials and eluded psychiatrists. It is all the more disturbing given the assessment that her 10 months in detention have tipped her irretrievably into a mental abyss, and her own refusal to have any contact with her family.