I would agree with everything people have said here.
The .au tells Google it's Australian so that ranking box is effectively ticked (and I do think this is a Yes/No ranking variable).
So the other consideration is speed which Google does bang on about being important for ranking. However I don't know whether it's as simple as saying a speed score of 1-100 will give you a ranking score of 1-100 for that particular metric.
I think it's probably simpler and more likely that Fast/Average sites will have a slight boost over Slow sites - another Yes/No ranking variable. So, upshot is, if you're sites are not image heavy and page load times are OK, it's probably just as well to save the hosting $$$ and stick with an overseas host. I alos recommend Hostgator.
PS The other thing speed influences is on-site conversions so if it's a lead gen site with a heap of traffic for instance, might be worth paying the extra to see if that makes a difference.