I used to live in Australia, at a time when most .au ISPs did not censor the Internet. However, transparent proxying was fairly common among ISPs anyway, because it saved them money. I suspect that might be what's happening here (though I guess the cost savings are higher when you do it in Australia, because data charges to Australia are ridiculous).

If the ISPs just wanted to implement IWF censorship, they could do it less invasively by using packet inspection.