Sorry just to be clear, when I'm purchasing bitcoins on Mt. Gox, can I only buy bitcoins off those people who are selling them for AUD or can I buy off the general exchange and the amount is just converted? Because when I change the currency on the Mt. Gox home page it shows the amount of bitcoins traded and for AUD it is small, but for USD it is massive, tens of thousands. Is this because more people buy using USD or because most people selling are only excepting USD for the exchange?
The funds in your AUD wallet can only buy from the BTC/AUD market. Because traders buying and selling over and over (versus just depositing fiat, buying and then withdrawing BTCs) prefer the market that has the most liquidity, they mostly only trade on the Mt. Gox BTC/USD market so that is why there is such a big difference in the size of the order book depth.
Now whether you are better off buying with USD on the BTC/USD market or buying with AUD on the BTC/AUD market depends on the open bids at the time, how many you are looking to buy, and the depth (to know how much "slippage" will cost), If you are talking about buying a large enough amount that you worry about there not being enough for sale at a decent price, know that there are people waiting for that to happen and will arbitrage between the BTC/AUD in on market versus the BTC/AUD on another exchange. So just because you don't see sell orders doesn't mean they won't arrive once you start buying.