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@badtmy
i reckon this one is a bit of a red herring, cos it depends on how you spend the cash. you can plough shitloads of cash into grassroots participation and not win anything, or you can plough shitloads of cash into talent ID/elite development programs and win a few trophies. sure, you need a reasonable pool of talent, and funding elite programs to the exclusion of grassroots will result in long-term diminishment of this pool, but in the short term it works.
Australia has done well at sport over the last 30 years because we built a great Institute-based infrastructure for developing elite talent, both for players and coaches, across a range of sports. This incorporates talent ID, professional coaching and a very scientific approach to training (sports science, nutrition, recovery, physio, the works). This all came out of our near-complete failure at the 1976 Olympics. Once this system was shown to work, it spread across heaps of sports in Australia, and eventually to other countries (see the UK cricket academy and track cycling program).
Other factors are the weather (of course), and our strong desire to win things rather than be 'diffident poofter artists'*. we have space to play sport, we have the weather to do it for most of the year, and we have a culture that rewards sporting prowess highly. you're just lucky that the most popular sport in australia is only played there. If the money, passion and effort that goes into AFL was channeled into international sport England would never beat us in anything ever again!
*this is of course intended as an exaggerated satirical view of the stereotypical aussie sports culture, not my own personal view.