Australia's top 3 parties achieved ~65% of the vote. That leaves about 1/3rd to minor parties and independents. Surely that's a great deal better than having just 2 parties with any real power.
Importantly whilst 90% of the seats may be in 4 distinct parties, that form two opposing sides, The Coalition suffered the loss of seats to independents recently. Labor voters in these electorates were able to vote 1 for the ALP and then send there preference to an independent in order to tactically vote against the liberals ruling party. This effect can be seen by the reduced labor vote in these electorates.
In your example, the voter has voted for their preferred (Labor) candidate over the independent. If the Labor candidate gets knocked out then their second preference says "if I can't have Labor then I would prefer an Independent over Liberal". That's the beauty of preferential voting, you generally don't have to vote tactically. You just vote for what you really want.
https://en.wikipedia.org/wiki/Instant-runoff_voting#Tactical...
While true, that 10% allocation of parliamentary seats to independents/small parties allows for a great deal of negotiation on policy. The smaller parties, particularly if the hold a sufficient level of balance-of-power, can see some/many of their own policies reflected in the eventual policies which pass through parliament.
[Edit: clarification]