Aussie - the "ss" should be pronounced as "zz", not "ss".

does this mean that Australia is supposed to be pronounced Auztrailia?

If it were Ausie, maybe we'd let you get away with this gross violation of proper English pronunciation rules but the double ess requires you to retain the unvoiced sibilant. As for the pronunciation of the name of the country, it's properly Australia because the sibilant is followed by an unvoiced plosive. Or do y'all pronounce it Auzdralia?