If you introduce harsh penalties for people found to be illegally in Australia, this makes it less desirable to be illegally in Australia.
Short of attaching tracking devices to all new arrivals, or the total collapse of the Australia economy (and I think it's perfectly possible that one or other of these things will eventuate within the decade), however, the existence of illegal migrants in the form of visa overstayers is inevitable, since there are so many other places which are worse to be in.
For those who are illegally in Australia, a harsh migration regime means that anyone who knows you are here illegally has significant power over you. One call to the "Dob-In Line and you're off to Villawood. This then gives those in possession of such information, such as your employer, who would in fact quite likely know damn well that you're not allowed to work here, an enormous amount of power over you. For example the power to make you work 7 days a week. Indeed to keep you in virtual slavery (whether or not this has happened in this case, it most certainly does happen, for example in the sex industry).
This goes not only for the approximately 50,000 visa overstayers in Australia, who, if they are still alive are likely in a position where they must work to survive, but also to the much larger number of people, such as those on student visas, who are living in Australia on visas which restrict their rights to work to the point where they cannot support themselves other than by working illegally, hence at risk of 'dob-in', hence at risk of blackmail.
This pool of labour is in fact very important to Australia's economy. All Western countries make use of a cheap pool of illegal labour. This is the form it takes in Australia: visa overstayers and international students. Effectively, the Australian migration regime forms a synergy with unscrupulous employers for the massive exploitation of an illegal workforce.
The third term in this system, along with the threat of the concentration camps run by DIMIA, is the horrendous conditions obtaining in so many countries that serve to make deportation so undesirable an option. This third term is imperialism, which is made possible by the militaries and the boundaries to the movement of peoples which tie them to a territory and allow for the concentrated exploitation of populations.