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I rang the US consulate this morning and there is no help availiable from them
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You'd think that "Yankee ingenuity" would figure a way to help a business trade with U. S. customers.
This is weird -- I don't see Australia listed as having an agreement to accept U.S.P.S. money orders, but Zimbabwe, Croatia, etc. are listed!
USPS - International Money Orders
Have you gone to a large office of your bank to inquire as to whether they will cash it -- it seems that it's up to them IF it is an International money order. If the customer told the Post Office where s/he was sending it, you'd think that they would have instructed him/her on what needed to be done.... You mentioned that it said "payable only in U.S..." -- if the customer didn't check to find out whether the money order was payable to you in Oz, then they should be embarrassed by their error. They should have a receipt that they can show to get their money back if you send them the uncashed money order.