"Playing hardball" does not require Google to abandon Australian customers, it just requires Google to have special treatment for Australian media sites - not providing any snippets from these sites, prioritizing all other sites when possible (so Australian sites only show up in searches for local news, and not on e.g. lifestyle articles) and of course they can simply not show any ads on the (very small portion) of the searches linking to Australian news sites, so that they get a percentage of $0.

I think the media conglomerates overestimate their importance to Australian customers - for countries like France there's a language barrier, but the vast, vast majority of searches by Australians can be served well without needing any content from the Australian news companies. If linking to your content is expensive, and linking to other content is cheap, then it's perfectly reasonable and generally legal to prefer cheap sources whenever possible.