Over this side of the ditch... after the initial "goldrush" on Student Loans and CPL courses left a lot of 'wannabes' with massive loans, half completed licenses/diplomas and whinging parents... they changed the rules.
Basically, a school is allocated a certain number of "funded" positions, that I am led to believe is, at least partly, based on the success of the previous year(s).
This puts some of the onus back on the individual training establishments to vet the candidates (tests, interviews etc) and ensure they have a reasonable chance of success. Otherwise their allocated positions get reduced which means less "easy" $$$$
As I see it, the foreign students are effectively self-funded, so there is no real onus on the training establishments to do this... and they can just take anyone with enough cash, regardless of their ability and likelihood of success.
I know here in NZ, the foreign students need to get a student visa to undertake flight training. Is it the same in AU? If so, maybe the government could look at limiting the number of student visas allocated to a particular school, again based on previous performance. In this way, the schools would have to be a bit more careful who they take... and might take a bit more interest in the progress of the students.
Additionally, the interview and testing process would hopefully weed out the "slackers"... so you're left with the ones who are actually going to make an effort.
It is after all, a two way street...