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According to the Treaty of Svalbard, all citizens of high contracting parties to the Treaty of Svalbard are allowed to live there.

As Australia was a contracting party, can they live there, or is there some other provision preventing this?

http://library.arcticportal.org/1909/1/The_Svalbard_Treaty_9ssFy.pdf

See especially Article 3

The nationals of all the High Contracting Parties shall have equal liberty of access and entry for any reason or object whatever to the waters, fjords and ports of the territories specified in Article 1; subject to the observance of local laws and regulations, they may carry on there without impediment all maritime, industrial, mining and commercial operations on a footing of absolute equality.

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Yes, all foreigners can live in Svalbard without a visa.

However, you’ll probably need to have housing and also a double-entry visa to re-enter Norway upon leaving Svalbard.

From the Governor of Svalbard’s site:

Visa to Schengen

In mainland Norway, the Immigration Act regulates foreigners’ access to and residence in the country. Although Svalbard is part of Norway, the Immigration Act does not apply to the archipelago. 

Foreigners do not need a visa or work and residence permits from the Norwegian authorities to travel to Svalbard. However, foreign citizens with a visa requirement for the Schengen Area must have a Schengen visa when travelling to and from Svalbard via mainland Norway. It’s important to ensure that you get a double-entry visa so you can return to the Schengen Area (mainland Norway) after your stay in Svalbard.

Requirements for staying

Although you do not need a visa or your own work and residence permit, everyone must meet certain requirements in order to stay in Svalbard. These requirements are governed by a separate policy called “Regulations relating to rejection and expulsion of persons from Svalbard”. Among the requirements is that you must have the means to be able to reside on Svalbard. These requirements apply to both foreigners and Norwegian citizens, and The Governor of Svalbard may reject persons who do not meet the requirements. Therefore, those planning to come to the archipelago are advised to obtain work and housing before they arrive.

(emphasis, apart from the titles, is mine)

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  • Australians do not require a visa to transit through Norway en route to or from Svalbard.
    – phoog
    Commented Jan 20, 2020 at 13:49
  • While the Svalbard Treaty only mandates equal treatment for nationals of the contracting parties, Norway has choosen extend this to all nationalities. Thailand is not a party to the treaty, but many Thai nationals live in Svalbard.
    – Arne
    Commented Jan 20, 2020 at 16:18
  • Mainland Norway is part of the Schengen Area, which many nationalities cannot visit without a visa. Residence in Svalbard does not exempt from having a Schengen visa. The Governor of Svalbard is authorised to issue Schengen visas, allowing for visits to or transfer through the Schengen Area. Nationals of Australia do not need any visa to visit the Schengen Area for up to 90 days per 180-day period. Time spent in Svalbard does not count. Australians can therefore transfer visa-free through mainland Norway to and from Svalbard.
    – Arne
    Commented Jan 20, 2020 at 16:25
  • @Arne what on earth would attract Thai people to live in coldest most northern public airport country in the world? I am very interested in this
    – Matt Douhan
    Commented Jan 21, 2020 at 4:02
  • @Matt Douhan I haven't asked any of them, but I guess that if you are industrious a place where everyone gets a chance, irrespective of nationality, can be enticing. Svalbard may for many also be the only place in Europe where they can migrate.
    – Arne
    Commented Jan 21, 2020 at 16:24