What I have been lead to believe is that you need to have 2 from 3 of the following match: Aircraft reg, locale and license. Thus you can fly a VH reg a/c worldwide on an aus license, or a G-reg in the UK on an aus license, BUT you can't take a G reg onto the continent on an aus license.
You've been mislead, but it's a very common myth, so you're not the only one.
The principle (ICAO) is that if your state of license issue matches the aircraft registration, you can fly worldwide, as long as you abide by the limits of your license, the aircraft and the airspace you're flying in. So you can fly worldwide in a VH-reg on an AUS license, worldwide in a G-reg on a UK license, worldwide in an N-reg on an FAA license and so forth.
But there are a few exceptions to this.
First, within the JAA member states, all JAR-FCL compliant licenses and ratings are considered equal. So if you have a PPL/CPL/ATP/ME/IR which is JAR-FCL compliant then it doesn't matter one bit which state issued it - it's valid (within its limits) to fly on any aircraft registered in any JAA member state. For national stuff like the NPPL or IMC this is not true, and there are a few minor exceptions to this as well. One of the most notable thing is that a UK-issued (JAR-FCL compliant) PPL doesn't allow you to fly VFR-on-top (out of sight of surface) unless you hold an IMC or IR. Other JAA member states do not place the same restriction on their (JAR-FCL compliant) PPLs. (Bring on EASA-FCL as far as I'm concerned!)
Furthermore, the UK ANO stipulates that any foreign, non-JAA but ICAO PPL/CPL/ATPL is allowed to fly a G-reg, but to PPL privileges only. In other words: your CASA license is implicitly validated by the UK CAA. And since the UK CAA considers your license to be valid for flight in a G-reg, this validation works worldwide. This doesn't necessarily carry over to other JAA member states though so the same might not be true on an F-reg, PH-reg or D-reg for instance. And if you decide to take the G-reg to far away places on your CASA license, you might want to bring the quote from the ANO with you in case you are being ramp checked by a grumpy official...
It is complicated stuff. The best source is LASORS and failing that, the ANO.
(And for the record, I stand corrected on the Day VFR limitation - did it from memory and was apparently wrong.)