Steve Blank recently recommended that the Finnish government "might want to consider putting themselves out of the public funding business by using public capital to kick-start private venture capital firms, incubators and accelerators" [1]
That's quite a similar model to what the Australian government does already.
I've been involved in a few companies that had some funding from the old COMET program[2] as well as the new Commercialisation Australia[3] programs, and they aren't as useless as you seem to think.
As you note many of the current set of Australian startups have been funded by overseas (ie, Silicon Valley) venture funds. Given that Australian venture funds don't see the opportunity it isn't at all clear why the government would think differently.
In my experience there is a lot more awareness and support at lower levels of government (state and local level), where startups are seen as supporting local employment. For example, NSW recently announced $3M in funding for "creative digital content" and there are a range of different programs in other states.
The Silicon Beach group is very involved in thinking about this. They operate mostly out of Sydney, but have an online presence too[5].
[1] http://steveblank.com/2011/10/07/the-helsinki-spring/
[2] http://www.ausindustry.gov.au/InnovationandRandD/Commerciali...
[3] http://www.commercialisationaustralia.gov.au/WhatWeOffer/Pag...
[4] http://www.startupsmart.com.au/finance/new-$3m-fund-for-nsw-...
