Disclaimer: I've spent the day drinking excellent local Victorian craft beers and am totally judging you for making me think about Fosters and VB so deeply. However I've also spent the day drinking a lot of craft beer so I'm not judging you that hard.
First some history. Fosters is one of the oldest breweries in Australia. It was first out at the end of the 1880s, but was not alone. A number of other still-famous breweries also date from that period, including VB and Carlton. The founders of the brewery were the Foster brothers, recent arrivals in Australia from America. American immigration was not uncommon starting with the gold rush but continuing as the city developed. Foster's beer was significant because it marked a significant shift toward lagers. Prior to this, IPAs were what people were drinking. The reason IPA's have India in the name is the high level of hoppiness and higher alcohol content helps let the beer keep longer in shipment, and so it was the beer that was brewed and shipped to British colonies, such as India, and of course Australia.
So Fosters was making Lager locally, and on a scale larger than anyone else at the time. Their beer was popular, but unfortunately their success was incredibly short lived, and within a year they sold off the company and left Australia. The reason was that once lager gained in popularity, it became profitable for importers to simply undersell Foster's. The cost of establishing the company and producing the beer locally was significant, so there wasn't much they could do to compete with this tactic.
They sold off the company, and a short time later, after continuing to struggle financially, the brewery joined in a merger with all the major breweries in the region. They began by simply cooperating and price fixing but then properly merged a few years later to become Carlton & United Breweries. Fosters was their high end label, and already had a good degree of popularity. In part this was a result of being exported to Aussie solders serving abroad, and in part because it was simply put in the position of CUB's top of the line beer.
Let's call this the starting point. Fosters is a popular, highly regarded lager that you get in a bottle and drink down on a hot January day.
So what killed it?
There were two major blows that Foster's suffered. The first was in the mid to late 20th century. The cause of this first fall was draught beer. Draught was popular, easy to get at your local, and cheap. Fosters was never a major draught beer at this point. It was a bottled beer and that was it (though this was also part of it's perceived status). It wouldn't become draught until much later. However at the time, as more people were around and thus more were drinking beer, more convenient draught beers were the preferred choice, and at the time, at least in Victoria, these were Carlton and Victoria, and of course other regions had their own favourites as well. With draught beer being so popular, people were not drinking bottled/canned beer, and so Foster's suffered.
To counter this, Fosters became big as an export, and in the 1970s, since it wasn't making money back home, was exported to and became popular in the UK and the US. Heavy marketing was a big reason for its success. It wasn't until the 1980s, nearly 100 years after it was first released, that Fosters Draught was made, and quickly gained popularity. One of the main reasons for this change was actually that once again CUB was suffering, as the 1980s brought a number of new major breweries into the market, and markets that CUB used to do quite well in were suddenly much less profitable. As a result, Foster's Draught was made to help combat some of these new brews.
However even when Fosters was draught, it wasn't always Fosters. Either it was relabelled Carlton, or licensed to other breweries. Regardless, it was on tap and along with other Aussie beers like Castlemaine XXXX, it was becoming highly profitable overseas.
With the spread of Foster's draught, it was making a comeback back home as well, and was once again becoming popular in Australia. The problem was that, once again, there were heavy marketing campaigns, but with much less success. The same Paul Hogan over the top Aussie caricature that helped make the beer popular abroad saw pushback among Australian drinkers. Not only that, but with mass marketing, any notion of Foster's as a premium label was lost.
As CUB tried to push Foster's as a quintessential Aussie beer, most notably around the 2000 Olympic Games, people rejected the notion. The advertising campaign became something of a joke, and in the end, local brewery loyalties trumped attempts at a pan-Australian beer identity, and people began turning away from Foster's and back to their local macro-beweries. VB started once again to gain popularity over Fosters in Victoria, but not yet nation wide. It wasn't until more recently that VB has started to spread on a national scale. Toohey's and Castlemaine and Boag's still held huge market shares in their respective areas as Foster's dwindled. Artificially induced national pride was not enough to save the label. White (cited below) refers to this as "commercial nationalism", as opposed to popular nationalism.
Today, it's almost never seen, aside from a few places that do go out of their way to keep it around. I'm not even sure if you can get it at Dan Murphy's, though I admit I've never made the attempt to track it down.
tl;dr: Shifting marketing strategies to help the parent company cope with changes to the domestic beer market led them to kill off whatever prestige Foster's had, and local loyalties to cheap draught proved stronger than whatever appeal Foster's still had.
References:
Blocker's Alcohol and Temperance in Modern History
Oliver's The Oxford Companion to Beer
Hornsey's A History of Beer and Brewing
White's Foster’s Lager: from local beer to global icon
among others