Australia does have the capacity to equip a 200,000 strong army, however it's unlikely we could do it with modern equipment. WWII level technology, absolutely, Vietnam era, perhaps. The problem is more with the advances in armour and weaponry - we know how, but can only produce on a small scale (upgrading existing equipment such as the M1 for example). Large scale means going back to simpler processes.
Now that may be well and good for fighting a low tech opponent such as Indonesia, but add in the necessity of conscription and you can bet the population will be very upset - bad enough you take our sons, but to give them obsolete equipment too!?