The word Australia when referred to informally with its first three letters becomes Aus. When Aus or Aussie, the short form for an Australian, is pronounced for fun with a hissing sound at the end, it sounds as though the word being pronounced has the spelling Oz.
Hence Australia in informal language is referred to as Oz. The noun Oz is also used to refer to an unreal, magical place, and this usage had its origins in the fantasy novel The wonderful world of Oz written in 1900 by L Frank Baum.
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