It depends on what you mean by Australia, which didn't exist as a political entity until 1901.

If you mean New South Wales, the oldest state and the only colony besides Van Diemen's Land established to be a penal colony, I would direct you to a quote by the historian John Hirst, who answered this question himself in Australian History in Seven Questions - he argues that "New South Wales did not begin as a penal colony, but rather as a colony of convicts". The difference is that New South Wales was not meant to be a penal colony in the long term, but rather a free colony established with convict settlers.

Hirst states that this is because in 18th century Britain, prison was merely a short stay prior to sentencing and punishment, and not the long-term reformative and punitive institution it became starting in the mid 19th century. The convict's punishment was exile, not imprisonment, and although governed and guarded by British marines, the convicts were expected to supervise each other, form families, find their own work and be paid for it, earn their freedom and form their own 'republic' of free Englishmen. Hundreds of women were also shipped to Botany Bay, and the first free Australians were born mid-voyage on the First Fleet. Arthur Phillip established a convict police force in Sydney's second year, and a convict's status was not held against them in Sydney courts - so it was possible for convicts to arrest thieving marines or sue free Englishmen for losing their baggage during the voyage to Australia. New South Wales followed English law, and an Australian convict had more rights and freedoms than an English one out of practicality, so that they could do things like give evidence or protect their property.

The British government's primary concern was not punishment at this stage, but rather costs and survivability - thus, establishing a somewhat self-sufficient economy was vital. Some convicts came with skills from their previous lives, and others learned them as they worked for marines or free settlers. They earned payment for extra work and established sponsors and support networks, meaning that by the time they were free themselves, living on land granted to them by the administration, they could establish their own businesses or work for one another. Some of New South Wales earliest industries, like boat building, sealing and whaling, were run by ex-convicts, and many individuals managed to achieve great financial success as traders employing convicts themselves.

All of this ran counter to a growing prison reform movement in Britain that was moving towards the long-term prison-as-reformative-punishment model we are more familiar with. By the 1820s, governors were being pushed by the British government to make New South Wales a more punishing place for convicts, as opposed to a place where fortunes could be made. In this they struggled, as the convicts were comfortable with their good conditions and acted out when forced to change. New settlements were opened up to house reoffenders, including Moreton Bay near Brisbane, Port Arthur in Tasmania and far off Norfolk Island - some of these barred women and lacked the comforts of Sydney, and had genuine prisons as we would imagine them. Reformers pushed the governors to send their skilled convicts to hard labour on the rural frontier, an idea that risked crashing Sydney's economy, and the British public's demand for Australia's booming wool industry pushed convict herdsmen led by convict supervisors into areas beyond the reach of the law, leading to runaways, rebellions and atrocities against Indigenous Australian. Prison reform was expensive and unpopular, and more trouble than it was worth.

Alongside the prison reform movement ran the idea that Australia's colonies needed an influx of free settlers to sweep away the immorality of its convict and ex-convict beginnings. Free settlers came with a home islands mentality of what prison should be (punishing and reformative), and also a sense of class consciousness - they resented ex-convicts having land, wealth and power. As democracy was expanded in Britain, so too was it demanded in New South Wales, and with it came debates over whether or not ex-convicts should be allowed to vote, or participate in a potential colonial government. If too many cons and ex-cons was the problem, ending convict transportation and sponsoring free settler migration was the solution decided upon before self-governance was granted, as it would eventually lead to free settlers outnumbering those with convict heritage.

All of this development can be contrasted with true penal colonies established later - these were mostly founded in pre-existing colonies, in an era where prison-as-punishment was the norm, with only male convicts and strict authoritarian rule. New South Wales began with liberal-minded ideals and goals that included imperial expansion and economic self-sufficiency, and this allowed for it to develop into more than just a prison.