It sounds like the dispute may have been escalated to a claim - the initial dispute is more to try and open up a means of communication between buyer and seller, where they can hopefully resolve the matter amicably, but if escalated to a claim, neither party can communicate via the dispute and PayPal will make the decision based on all the evidence provided by both parties.

As PJ says, the outcome is never quite set in stone; occasionally PayPal need to be reminded of the different policies in place here, but if all does go according to Australian policies, I'm guessing the buyer is probably going to get a rude shock.