No idea on the regulations in Australia regarding transmitting power, but during set-up such devices will always ask for the country you are using it in, and by doing so it will normally only allow settings which are legal in that country.
This is mainly done because not all regular wifi channels are open to use in all countries, so channels are getting blocked, for example channel 12 to 14 on the 2.4 Ghz band in the USA where they are not allowed to be used.
Regarding power output, that one will also be limited as per the law in your country.
It's anyway not expressed in mW, but in EIRP, effective radiated power, which takes into account the gain of your antenna. With a high gain antenna you will reach the maximum EIRP at a lower mW level!
And no, those mW wifi transmiiters aren't going to microwave you when you're standing in front of them, would need power a few hundred times higher!
By the way it is pretty much how they discovered you could use microwaves to heat stuff, when a chocolate bar in the pocket of a radar engineer melted when he was standing in the beam! First microwave oven was actually called a "radarange" as patented by Raytheon...
----Edit----
After a bit of research, if following link is current, it seems that in Australia on channel 1 to 9 you are allowed a much higher transmitting power then on the higher channels.
http://www.benelec.com.au/forms/EIRP%20System%20Calculator%20for%20Basic%20Ant%20Inst.htm
Might be usefull to play around with that when testing.
On the higher channels the built in 0.5 watt transmitter would have to be seriuously held back to stay legal, on the lower 9 channels you can actually go full power.