My problem was buying an item on ebay Australia, and the seller insisted on listing the item in US dollars. The item description stated that the item was in South Australia, yet the seller quoted the Australian postage in US dollars also. What's the go there why is it allowable for a seller to sell within Australia in a foreign currency. This means that on any given day the item cost and associated postage would be greater or lesser depending on the exchange rate that day.

Yes that is exactly why they do it. So you must check what $'s the items are listed in. It is wrong I feel but that's just my opinion. I helped a group start up another auction site 2 years ago and even though there are sellers all over the world the ones in Australia listed in US dollars I didn't and wouldn't as they explained it was worth more money due to the exchange rate. I could not do it as I think that is stealing as you are deliberately misleading the cost as if you are on eBay.com.au you assume it is in AU$. Allot of people don't relise the item is in US$ so they bid away and before they relise they have completed a sale in US$ even though the seller is in Australia and selling on eBay.com.au Unfortunatley this happens everyday so you need to be vigilant and read all off the sellers description, feedback etc.
I do understand why Aussie sellers do this though as eBay have let down allot of sellers with this paypal business and the changes they have made which do effect the seller and allot have gone out of business because of eBay and their fees.