The joke is made based on perspective, if you are in an australian sub someone can make a joke on europe seeing it like that, the fact that mostly ppl from the north emisphere do it shows nothing, it's literally a matter of perspective
As far as I know the joke is based off the flat earth conspiracy which says that Australia can't exist and therefore must be on the other side of the flat earth
we've got silly names like bottle shop for where we buy booze (sells bottles), usually shortened to bottle-o, similarly you have stuff like service station -> serv-o.
Indigenous place names often have "wo" sounds and repetition, you get stuff like wagga wagga etc. Consequently we tend to say "it's in woop woop" if something is the arse end of nowhere.
Plus there's the sheer lack of imagination in the English colonial naming. I mean "new south Wales"? really? Not even like "yeah this is like Wales" someone looked at a fucking dry sandy cliffy bay and said " you know what this fucking reminds me of? Wales. Wait no, the southern part of Wales"
You dont get it, they make jokes that will get a rise out of you. If its a good joke we can all laugh, but if they make the same bad joke every time, it gets to you more than an actual slagging will.
Take it from an Irish person, we know how to handle lame jokes the americans come up with.
Teasing is fun it's just that's all they have and it's so boring.
Like do something different, mock our slack mouthed drunk accents, how fucking uptight the government is, how soft we are about cold, how much we drink, literally anything.