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I like the classics, though they're obviously not going to give you much insight into contemporary Australia. I read a lot more contemporary Australiana as a kid.
Miles Franklin - My Brilliant Career (but she should have gone with the other guy...)
Ethel Turner - Seven Little Australians (our answer to Little Women)
Mary Durack - Kings in Grass Castles
Elyne Mitchell - The Silver Brumby series (for children)
Colin Thiele - esp February Dragon (no, not fantasy. Mostly children/YA fiction, but contemporary.)
For contemporary cultural insight, your best bet might be family sagas / romantic dramas like those of Judy Nunn.
For a SF take, try
Sean McMullen
Isobelle Carmody (beware that the Obernewtyn series is still not finished after 25 years and only 6 books so far, though Wikipedia tells me that the last is due next year.)
Cordwainer Smith - Norstrilia (ok, he's not Australian and the book is not set in Australia, strictly speaking)
And of course there is
Terry Pratchett - The Last Continent. As stated in the blurb, it is "not a book about Australia. It’s just vaguely Australian."
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