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As with many things in World War II, the Japanese were not united on this issue. There were arguments between the Navy and the Army (which had a very hard time getting along on anything) as to whether invasion of Australia would be possible. I would suggest that you look at The Rising Sun by John Toland as a source on this.
Toland tells us (pages 345-6 in the paperback edition of the book that I have) that the Navy actually did want to invade Australia. This was early in the war when the US was very much on the defensive. The Navy thought it could take five Army divisions and use them to invade Australia.
The Army thought the plan was ludicrous. They pointed out that Australia was much larger than Japanese-occupied China and would be much harder to accomplish. They further argued that there was not enough shipping to make the invasion work.
Eventually, the Army won out and the plan to invade Australia was scrapped. That would seem to indicate that, in the eyes of the Japanese high command, at least, it was not within Japan's capabilities to invade and subjugate Australia. As for intentions, there was such an intention on the part of the Navy but not on the part of the Army.
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