Their website says you can unlock your iPhone for free, but you will still be liable for your contract payments:
http://service.o2.co.uk/IQ/srvs/cgi-bin/webcgi.exe?New,KB=Companion,question=ref%28user%29:str%28Mobile%29,CASE=17424
You will be able to use it with a SIM from an Aussie mobile company (pay as you go or month-to-month contract) provided O2 will unlock it (which they may charge you for).