ALL-terrain wagons, or four-wheel drives as they are more commonly known, have been the biggest growth area of the new vehicle market over the past six or seven years.

In 1996 the 4WD category accounted for 7.7 per cent of the total market, while in 2001 that number had almost doubled to just over 15 per cent - the result for 2002 looks set to rise to around 17 per cent.

Subaru's Forester has played its part in that growth spurt, which is founded in the trend towards four-wheel drive vehicles as family cars and daily transport.

It has also played an integral role in the success of the Subaru brand in Australia. The Forester has been the company's top-selling model for three of the four full years it has been on the market, accounting for more than 30 per cent of the total volume, and it is on target to do so again in 2002.

Essentially unchanged since it arrived in 1997 - apart from some minor trim and specification revisions - Subaru has now given the Forester a major freshen to keep pace with the other key players in the compact four-wheel drive class - Honda's CR-V, Toyota's RAV4 and the newcomer to the field, Nissan's X-Trail.

When one manufacturer ups the ante it is inevitable, given the competitiveness of the segment, that the others will soon follow.

The CR-V has been the dominant force in the segment in recent years, outselling even Toyota's venerable LandCruiser for the overall title of biggest selling 4WD during 2000.

But generally it is a fairly close race with the Forester and RAV4 topping the sales charts themselves from time to time - more often recently in fact, with the second generation CR-V now also competing for sales against the Mazda Tribute, Ford Escape and Jeep Cherokee.

Nissan made the first move to raise the bar when it released the X-Trail in October, 2001, packing a 2.5-litre four-cylinder engine producing 132kW of power and 245Nm of torque.

Those outputs established it as the clear leader in the compact class for outright engine specs, at a time when the Forester, CR-V and RAV4 were all powered by 2.0-litre engines.

Honda followed suit soon after by fitting the CR-V with a 2.4-litre powerplant developing 118kW and 220Nm, so now Subaru has given the Forester a transplant using the 2.5-litre engine from the Liberty - it has already been used with the company's small car platform under the bonnet of the Impreza RS.

With 112kW and 223Nm from the larger capacity unit - increases of 20kW and 39Nm on the superseded 2.0-litre engine - the Forester is now back on a level playing field with the other leading compact off-roaders.

Out on the road, the performance increase is not as pronounced as you might expect. Mid-range urge is the biggest area of improvement and it's quite happy to spin all the way to redline (although it gets pretty noisy in the upper reaches of the rev range when you do), but there is still a lack of decent pulling power from low revs.

Coming out of slow speed second gear corners or roundabouts there remains a noticeable flat spot, or lag period, while you wait to get some revs onboard before the Forester will pull away with any zing.

It's more obvious in the manual variants where you are less likely to go back to first gear - given that you are already rolling - while in the auto there is the benefit of kicking down to first gear for a quicker getaway - although the harshness of that down-change is likely to prevent you doing it unless absolutely necessary.

The torque increase is really more evident in higher gears, where it can cope with holding a taller gear without the urgent need to down-change.

Something else that remains is the enviable reputation the Forester has earned among the soft-roader set for on-road performance. The driving experience it offers continues to be more car-like when compared with the higher-riding vehicles like CRV or Land Rover's Freelander, yet at the same time it is still equipped for moderate off-road duties courtesy of its dual range transmission (in the manual variants), which its main rivals cannot match.

Ground clearance has been maintained at 200mm, enabling the Forester to keep ahead of its key soft-roader competitors - CR-V (170mm) and RAV4 (190mm) - but handling is still quite car-like and more than respectable for a light duty off-road vehicle.

The additional grip offered by four-wheel drive - or all-wheel drive in Subaru-speak - gives the Forester safe and surefooted handling with predictable, and easily countered, understeer at the limit, but nary a wag from the rear end on bitumen surfaces.

Push it hard around corners and the tyres will squeal noisily in protest as they approach their grip limits, not as early as with the previous model but certainly before reaching the limits of the chassis - the compromise that must be suffered so the tyres maintain a modicum of off-road ability.

That said, the new Yokohama Geolander G900s are still better suited to on-road driving than the Bridgestone Duelers they replace and are really more comparable with the previous generation Geolanders fitted to the turbocharged GT model.

Brakes continue to be one of the Forester's weaker points despite upgrading to larger diameter front discs, along with other system improvements. Pedal travel is too long before the brakes really bite and even when they do they don't haul you down from speed to the extent you would like or expect.

As a result, you always feel you are working them harder to cope with the vehicle's size and weight than is totally comfortable or reassuring.

The new interior is a huge advancement. The change is so dramatic it has even leapfrogged the second generation (current) Impreza for finish, quality of materials and overall refinement.

The result is still a tad plain when compared to many Euro-styled interiors, but its simplicity is to the benefit of cockpit ergonomics, as well as driver comfort when spending long periods behind the wheel.

Standard equipment levels for the entry level 2.5 X model have crept slightly upmarket, but then again so has its price - up $1000 for the five-speed manual and therefore no longer benefiting from the more affordable appearance of its predecessor's sub-$30,000 ($29,990) sticker price.

The X now gets standard ABS (anti-lock brakes), in conjunction with EBD (Electronic Brake force Distribution), whereas the previous base Forester was left wanting for that big-ticket safety item.

For the other critical features the Forester is at least on a par with its competitors - standard air-conditioning, dual front airbags, remote central locking, electric mirrors and windows, cruise control and a CD player.

The audio system is not up to the same level as that found in Liberty and Outback models, but it is still a noticeable improvement on the old model - the better quality materials in the new interior would seem to translate directly to more solid mounting points for the speakers and therefore improved sound quality.

The exterior styling may not be as significant a step forward as those offered by the engine and interior upgrades, but at least that allows it to continue to build on the strengths of the Forester brand, rather than losing its image altogether as happened with the current Impreza WRX.

All that's missing now from the Forester package is the high performance, turbocharged GT model. It is set to return in about 12 months as the Forester XT and hopefully with a turbo 2.5-litre engine, rather than the old 2.0-litre unit.

The raft of changes Subaru has made to the Forester do not seem particularly substantial when viewed in isolation, but they add up to a much-improved package in virtually every respect.

It remains lacking in a few areas, but what model in this segment doesn't? It really boils down to whether you want the extra interior space and traditional high-riding off-road body offered by the likes of CR-V and X-Trail, or the slightly smaller car-like package, with equally car-like responses, of the Forester.

Either way, you are unlikely to be disappointed with the purchase decision.