The Australasia was launched on September 17, 1884, from the James Davidson shipyard in West Bay City, Michigan. Construction of the 285-foot wooden bulk carrier was accomplished with a crew of 150 men at a cost of $150,000. The Australasia was the largest wooden ship built at the time, and its launch was accompanied by much fanfare. Throughout its service career, the Australasia carried bulk cargoes across the Great Lakes so efficiently that it competed with larger, more modern steel ships at a time when wooden vessels were becoming obsolete.

The Australasia generally towed a large wooden schooner barge as its consort, as with many other Davidson steamers. This gave the wooden vessels a competitive edge over larger steel bulk carriers. Working in tandem, a wooden steamer towing a consort could carry between 7,500 and 8,500 tons without a significant increase in operating costs. Technological advances gave bulk carriers enough power to efficiently tow one or more consorts—essentially doubling or tripling the cargo load per trip.

On October 3, 1884, it arrived in Milwaukee on its maiden voyage laden with 3,150 tons of salt; this was the largest cargo ever carried by a Great Lakes vessel. It continued to transport salt, coal, and other cargo for the next twelve years. On April 26, 1889, the Australasia became stranded at Gull Rock, Michigan Island, in Lake Superior. The tug Record aided in freeing the vessel, however the Australasia was badly damaged. Weeks later, on May 8, it was towed by the tug Mocking Bird to Cleveland, Ohio; total damages were estimated to $11,000. The ship underwent repairs and returned to operation three weeks later.
On Saturday October 17, 1896, at approximately 6 pm, the crew of the wooden steamer Australasia discovered "a fire beneath the texas on the main deck." The crew abandoned the vessel after a half-hearted attempt to fight the fire, reaching Jacksonport, Wis., that night. At 10:30 pm the tug John Leathem reached the steamer, which was by then about four miles off Jacksonport.
The tug began towing the vessel to shore, but the tow line kept burning through and it was not until 9 am Sunday that the Australasia was dragged onto the beach in fifteen feet of water south of Cave Point. Scuttling was accomplished by ramming a hole in the steamer's side with the Leathem's stem. The steamer was left lying heading northwest by west, and burned until Sunday evening. In the evening of October 17, 1896, the crew of the Australasia discovered a fire beneath the main deck. All crew abandoned the vessel after attempting to put out the fire, and reached Jacksonport, Wisconsin later that night.
The Australasia was declared a total loss, her cargo of coal and machinery were salvaged, but the rest of the hull was abandoned and forgotten until its recent rediscovery. The lower hull lies on a sand bottom in twenty feet of water much of which is buried in sand. No evidence of the cargo of coal is apparent on site, but coal is found on the nearby beach The Australasia wreck site has remained lightly visited by divers and very little site disturbance has occurred.