Without doubt, the thing I hate most about Australian fashion is this idea of elitism and degrading people who dress in 'a typically Australian way'.
I don't think dressing 'australian' is a bad thing at all, and we definitely shouldn't try to be something we're not, but I think the average australian could stand to put in a little more thought when getting dressed for the day. Wearing thongs isn't bad per se, it's how you wear them. Put in the effort to find a nice pair in a colour that works with stuff in your wardrobe, that sort of thing. My favourite australian labels are the ones that do good quality casual wear in easy, simple, surf inspired looks.
Also.. I've seen bums in redfern who have style - they obviously aren't wearing anything expensive, and they look kind of dishevelled/grungy, but you look at how they wear a beanie or a shabby shirt and it works because they've got the proportion and fit down.
Oh, and I saw an amazing outfit at town hall station recently. A masculine guy, fairly tall, tanned, in graphic printed boardshorts (black, white lines and aqua gradients.. it wasn't gaudy, though), a crisp white shirt, and a largeish white leather shoulder bag in a classic shape. It looked like a ladies handbag but it worked, and so well! It was pulled together, and it whispered 'fashion' instead of yelling it out loud. Wearing boardies in the city is kind of a fashion faux-pas, or tourist thing, but I think it can be stylish if you do it right - pairing it with a simple top so the outfit doesn't look too busy. And one luxurious, understated accessory as if to say, "yes, I know i'm in the city, and no, I didn't trek here from the beach". Normally in warm weather i'll just wear denim shorts because they work more coherently with my casual stuff, but I think i'll try the statement-boardies look because it's a quintessential australian item (in summer we would get them for christmas and often had family outings at the beach. I gave them up in high school out of embarassment and cultural cringe). Perhaps it's time to give it another go. And billabong has improved over the years..