In most countries, if the buyer does not get the item sellers have to make a full refund (see the US for example). Not in Australia.
In Australia, a twist of consumer law means that as soon as Australia post receives the item, the seller is no longer responsible. You've probably seen this referred to in lots of listings - e.g. 'I will not be responsible for items lost by Australia Post'.
Interestingly, this is often followed by something like 'Registered post can be arranged at the buyer's expense.' But what does sending something registered post actually give the buyer?
Answer: nothing. Registered post is a contract between the seller and Australia Post. So even if your item is sent registered post, you (the buyer) can't file a claim, and you can't force the seller to file a claim either. Even if the seller does file a claim, you can't force them to give you the money. You have to cross your fingers and hope that (a) the seller isn't too lazy to file a claim on your behalf and (b) that they will actually ensure that you get refunded if the claim is successful.
What's worse is that you, the buyer, are more likely to get refunded if the item is sent standard post. This is because of how Paypal works - if you file a claim, and the seller can't prove they posted you the package, they will have to refund you. If you take a look at Paypal's page on Proof of Shipping, you'll see that this generally means that the seller will have to refund you if the item is sent standard post - but not if it is sent registered post.
So don't pay the seller extra for registered post. It costs you your money, and it costs you any protection that Paypal can give you.