I believe you can only do the online process once you've already had a passport and the initial passport is issued by the "traditional" means of showing up in person.

Replacements and renewals can be done entirely online because of facial biometrics (to compare the previous passport photograph with the new one and to see if the new picture may be used elsewhere) and digitization of other records for internal comparisons.

ABC (Australia) has an interesting video on Youtube describing the process.