I'm a bit dubious on that claim. All I can find on this through a Google search is some that come from even more dubious sources:
SAS BLOODBATH IN TIMOR: 100 INDONESIANS KILLED
Defences of Australia Rundown? Australia could "face invasion"
Tony Pitt 's Defence Report (1999) - (An Ex-Warrant Officer's View On Australia's Defence)
The only problematic issue that I know of with the Steyr Stg-77 (AUG) is that the recoil spring rods retain water if totally submerged for a good length of time, which can lead to rusting if preventative maintenance is ignored.
The belief that the AUG's plastic parts melt on full-auto fire, I totally reject. The 'plastic' parts are located nowhere near a heat source, unless this is the trigger housing area that covers the receiver. I have never even felt them getting warm after several hundred rounds fired in rapid-fire. Ninety rounds and/or nine seconds of auto fire allegedly causing this is an outright laugh.
From a Australian Army armorer's member report on www.steyr-aug.com:
"...There has been several myths about Steyrs "melting" during firing - these are largely myths. The only case which I am aware of a Steyr actually melting was in 1995 in Singleton. It occurred during a battalion firing exercise. After the shoot was over , one of the firing range safety officers collected all spare ammunition he could find - 25 magazines in all. He fired them one after the other on full-automatic. Needless to say the gun jammed due to the barrel expanding from all the heat generated and part of the polymer stock melted. It was than estimated that the rifle heated up to 500 degrees Celsius - conventional rifles would jam long before that. Other than in the extreme case stated above , the F-88 is not prone to "just melt"....
Australia's Lithgow Arsenal may indeed be having problems with building integrated optics for it's F88 clone licensed through Steyr, and I've heard they're nowhere near as high-quality as the Swarovski-made optics that are made with the same craftsmanship as you'd expect coming from one of Europe's premier jewelry houses.