Mate, it seems like you guys need to develop some social skills in a multicultural community. If your group of friends are deliberately speaking in a different language to be rude to your local friends, then its a not the same issue, they are just simply being d!ckheads. But if they are genuinely having a nice conversation amongst themselves, then your local friends needs harden up a little or find a way to ignore it. If you are the middle man between the two groups, you should take some responsibility to ensure both sides are comfortable (to some extent of course, can't keep everyone happy all the time :P).
I can't say I've ever heard of that "aussie culture" that you mentioned. The biggest problem is feeling insecure and afraid of what people are saying about you. But guess what, thats a natural human reaction: to be weary and afraid of the unknown. If a person is not open-minded enough when they encounter a look, a language, or a certain culture, they will be defensive (and usually put it down by making fun of it). And its not just people; when the first microwave oven came out, the majority of people were afraid to use it cause they feared the food would be radioactive. And some vaccines (inc the ones used today) are derived from animals, such as cows; and people at first were afraid they would develop animal traits when vaccinated :D.
As with the intercultural b1tchen; it would never end, and thats simply due to the above point about reacting to someone different to yourself; and every race and culture is guilty of that.
Mish: next time that happens, you should make it known that you understand what they are saying but don't get upset; you'll find that you'll embarrass the sh!t out of them. I done it in a pub in Taiwan where these two white dudes where saying that Asians can't drink so I confronted them with a challenge :P and then they went all apologetic and bought my group of mates around of beer :D good times.