I have been pondering ever since I heard the exact same story twice from people in two different parts of Australia. On a past trips to America, both of these people had experienced the "Oh, we love Austrians!" response after telling someone they were from Australia. Both times this story was used as proof that Americans are geographically challenged. While I won't disagree, I think I've gotten to the bottom of this particular issue.
As I was hiking through the rainforest last week, as usual I let my thoughts wander. In particular, I was thinking about the precious way that many Australians pronounce the name of their country. To my American ear, it sounds a lot like "Austreya." I was saying it over and over to myself in time with my steps (I am wont to talk to myself out in the woods when no one is around) and all of a sudden it dawned on me the similarity of the sounds "Austreya" and "Austria". If you leave out the crucial "l," it could very easily be mistaken. And if you don't recognize the accent, there's no way you'd ever question unless the offended Aussie laughed in your face or, more likely, politely corrected you.
Stumbling upon this theory was so incredibly satisfying. Now I just have to spread the word and make it true.