It is true that the Australian flag was chosen following a national competition in 1901. But the competition was a British, not an Australian, idea. And it was to choose not a national flag as such, but an ensign to be flown on ships. It was for this reason that the two ensigns could not be formally adopted until they had been approved by the admiralty. And it was clear at the time that the only possible design for such an ensign was one that carried the union flag in the quadrant and a local symbol on the fly, or “defacing the fly” in the language of flags. With its two ensigns Australia joined the fifty or so other British colonies that had blue or red ensigns defaced with a local symbol. In other words, it was one of the least original flags in the world. But it was the only type of flag that Australia was permitted to have. The Britishness of the flag, apparent to everyone in 1901, was re-emphasised in 1954 with the passage of the Flags Act, which for the first time declared the blue ensign to be Australia’s national flag. But in doing so the preamble of the act declared that the Australian flag was the British blue ensign...Henry Reynolds, at Inside Story.
There are still places in the world that have flags very similar to Australia’s blue ensign. With the exception of New Zealand and Fiji they are the tiny island remnants of Empire [and Hawaii - RobW]... Ten of the islands have fewer than 10,000 people; all of these are administered as British Overseas Territories. It is strange company for Australia to find itself in. If this does not produce any embarrassment, there is also a proliferation of blue ensigns in Britain itself, where they are used by government departments and even more prolifically by yacht clubs, which have been able to adopt blue ensigns since 1922. There are now about one hundred of them.
Just for the record, I regard the idea of changing the flag for nationalistic reasons as being as much of a wank as the insistence that the design is inviolate. It's a design: the only valid criteria for assessing its worth are aesthetic (well, and avoiding unfortunate cultural resonances, such as you'd get from four L-shapes in rotational symmetry), and the current design is simply boring and ugly, like our leaden anthem. Personally I'd like to see the Eureka flag adopted, but only the design. As it's such a distinctive and recognisable design (no other flag with a similar cross sports stars in those positions), people could use whatever colours they want: Green and Yellow for the boxing kangaroo types; Blue, White and Red for traditionalists; Red, White and Blue for Yanqophiles, White, Blue and Red for Russophiles; White, Red and Blue for Czechophiles; Orange and White and Green, Black and Yellow and Red, Blue and White, Red and White, Yellow and Blue and Red, and all the other combinations of other national flags for those commemorating immigrant heritage; Black and Red for the anarchists; Red, White and Black for Nazis; Red and Yellow for fans of the People's Republic of China; Yellow and Red for fans of Ronald McDonald; etc...