Why do you think Indonesia would got for PNG? There's no logic to it that I can see. The terrain is just too rough for the effort to be worthwhile.
I agree that Indonesia would be mad to invade in it's RL situation, but if it could have temporarily quelled dissent, perhaps with offers of land for the crowded masses, and organised just their normal standing army, hell, even just a fraction of it, they could have captured, and held (at least to begin with) a sizable area. A totally untenable position in the long term, but if the aim is nothing more than to dump a few million less desirable ethnic minorities....
Indonesia has no hope of defeating Australia, but they could hold some of it provided their logistics were sorted out.
My belief is that Australia won the war, perhaps by throwing the Indonesian military back into the sea, but I can also see a lot of "settlers" showing up, trying to survive for a while before throwing themselves on the mercy of the Australians. With the virtual destruction of mass transport capacity, Australia would have no choice but to absorb them rather than send them back.
Mind you, I'm just throwing ideas out there...
It's worth noting that in the 80's and 90's the Australian military were training to fight the mythical enemy invaders the "Kamarians" who's home country, "Kamaria" was located roughly in the same location as Indonesia...
Yes, there actually were plans to deal with just such a situation.
http://www.4rarassociationsaustralia.com/irc.html
http://www.theaustralian.com.au/nati...-1111115959477
http://www.securitychallenges.org.au...rabinSmith.pdf
A decade it two earlier and the mythical enemy was Musoria, which we were told was equipped and organised as well as located in the same general area as the USSR.