"I think some people are waiting with baited breath and wondering whether this beautiful façade will start to crumble here, too," Arnold said.

The office of Communications Minister Stephen Conroy told reporters Wednesday there was no evidence that Murdoch employees engaged in phone hacking in Australia.

In the wake of the phone hacking allegations, the Australia government formed the Independent Media Inquiry in September, also known as the Finkelstein hearings, led by retired judge Ray Finkelstein. The panel was charged to, in part, review the effectiveness of the Australian Press Council to handle complaints against the media.

But Australian media observers said the panel was convened to put pressure on Murdoch publications for aggressive coverage against the ruling Labor Party.

"The Murdoch press has been extremely critical of the Labor government here and a perception here that it had an absolute agenda of attacking the Labor government," said Martin Hirst, an associate professor of journalism at Deakin University, who gave testimony at the Finkelstein hearings.

Still, the recommendations made from the inquiry -- including a statutory authority that would regulate news and commentary -- was rejected in a government report, the Convergence Review, issued Monday about proposed changes Australian media regulations. "While agreeing with much of the analysis and some of the findings of the Independent Media Inquiry, the Convergence Review recommends an approach based on an industry-led body for news standards rather than a statutory body," the report said.

Given the weakness of the ruling Labor Party in popularity polls, Australian media observers say there is little political will to take a hard look at Murdoch media operations there.

"I think the crucial thing is here there isn't a community interest. If (politicians) saw that there is strong community support to take on Rupert Murdoch, to say, `we will vote for you on the position that you'll go in there and clean the stables, ' then maybe they'd act," Arnold said.

"But there is no community pressure for that, unless we have a real revelation about malpractice in the Australian media industry in a big way," he added.