As near as I can make it the information I found in a Search Engine Watch forum seems to sum up the situation fairly well. Here is a summary:

• Host in a particular country, you’ll almost certainly be seen as related to that country. So, host your .com or .au site physically in Australia, and you should be seen as Australian
• If you have a [.com.au] domain then even if you host in the US, you should still seem like an Australian site to Google.
• But what if you are an Australian site using .com? Then unfortunately, you’re stuck — the .com part doesn’t expressly say Australian, so chances are if you host in the US, you won’t be seen as Australian.
• Links  — if you have many backlinks from major Australian sites, then that might help you seem related. i.e. get sites that are known to be Australian to link to your site, and it might be seen as Australian. (seems a bit “iffy” this one doesn’t it?)

Sometimes I think the simple approach is the safest. If you are an Australian business selling primarily within Australia then use a “.com.au” domain. That way you will have no problems. In general of course so many product ranges are only viable within Australia simply because of the rather expensive overseas freight issue.

If you have any further information on this matter I would be happy to hear it. It is easy to imagine a situation where it could make or break a site owners marketing efforts.