For our application I simply scanned the policy document of our travel insurance policy provided with our bank account and supplied that. It was obviously sufficient as our visas were issued the following day. ( I had to resend the file as some pages had not scanned adequately)
I would suggest, if you dont already have such a policy, purchase one from somewhere, there are many cheap annual policies available, and send your case officer that.
If, once you are there, you decide to rely on medicare I would certainly consider taking out at least ambulance cover which I believe isnt covered by Medicare. The South Australian Ambulance Service runs their own policy which would cover you nationwide, and from what I recall it is not expensive, far less than one call out.