The Progressive establishment did/has done/continues to do the same thing in the United States regarding the Gadsen Flag and the Confederate Flag.
The thrust is expressed perfectly by Professor Fozdar...
"But there is a place for more public education about the value of diversity to Australia to encourage people to feel more positive about that diversity."
...in that patriotic flag flying Aussies need to embrace diversity and indirectly become less patriotic in order to make those who are insulted feel more comfortable. So, rather than incorporating the affected groups into becoming prouder, more patriotic Aussies, and educating them to embrace the Aussie flag as a symbol of their own patriotism, it is easier to demonize those that fly the flag as racist.
Let your flag fly high and proud! Make no excuses for being patriotic. Only the ignorant believe that flying your nation's flag is a symbol of racism.