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I also thought it referred to 'Proud of Mother England' so no I don't think it's offensive in the slightest.
Besides it's the way the word is used rather than what it necessarily means.
Aussies don't usually use it in a deragatory way so in which case it wouldn't be offensive.
Anyone who does think it's offensive should perhaps be rethinking whether they should be moving / living in Oz.
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