Actually, I was fairly heavily involved with the Dems at the time (it's the "dem" in my pseudo!), and what actually happened is worse. They had no structure in place at all to gauge what the party rank and file wanted, no structure for debate, and pretty much no structure at all. They got to be the maximum size that a party can be before internal strains make them implode I think. So when the Howard Government proposed the GST, the Democrat Senators achieved a consensus amongst themselves on what would be an acceptable form of the GST (they, in particular Natasha Stott Despoja, added in many of the exemptions, such as on books, fresh food and so on).

There was no mechanism for the rank and file to state their resistance in a timely fashion in a way that the leadership could hear, and of course the membership itself was deeply divided on the issue - once again, there was no mechanism for dissension amongst the membership to be dissipated. The result was that the party blew up in spectacular fashion at the next elections, unable to get the membership enthusiastic enough to put boots on the ground to run election activities, with a consequent massive drop in the polls, leading to a drop in funding, leading to extinction.

I was in the NSW branch and as a result of this mess became policy manager and tried to put in place what we would call a crowd-sourced policy creation system. But this was in the early 2000s, the Internet was still not entirely ubiquitous, and management in NSW decided that we had to do this thing on paper, not on the Web. It was slow, painful, and I moved countries before getting to the end (and anyway, it was too little too late, the writing was on the wall).

All of that to say that I don't think we can use the Australian Democrats as a counterexample for direct democracy. They never really had the processes in place to give such a system a chance. Today the story might very well be different if a direct democracy party was tried with a correct set up of tools to allow the rank and file a chance to meaningfully participate in policy creation. I've often thought about trying to set one up on that basis, but since I live in a country now where I'm not even a citizen, I've never tried.