Yeah the scholarship is definitely more competitive for international students because you're ranked against everyone outside of UNSW (which includes applicants who did their undergraduate study from other Australian universities).
I can't say for certain, but I think having a supervisor with that background does help, but it's more important for that supervisor to have applied for research grants and funding. Also, the more established researchers (typically Associate Professor and above) will be able to work something out if they really want you to work with them (although my anecdotes were only from domestic applicants).