A sales assistant materialises beside us. "If you know how to play, you can go for it!" she enthuses, but Hogarth isn't here to make music. He asks her about the artists who painted the instruments. "Arrr, sorry, I don't know much about it," the sales assistant admits. "But I know they're all painted by hands. By the artists' hands."

Hogarth smiles wearily. "Including this one?" He indicates the didgeridoo with the ubiquitous roo image, which is shorter, lighter and cheaper than the others. "Yeah, yeah!" says the saleswoman. "That one, too."

But Hogarth knows better. "More Indonesian crap," he tells me. "It isn't Australian wood, it's bamboo. And you can tell by the painting style, and the lacquering, that it came from one of the fake Indigenous art factories in Bali. There's nothing Aboriginal about it."

He moves on past arrays of decorative tea towels, oven mitts, back scratchers, drink coasters, wine coolers, clothes brushes and ashtrays – many of Indonesian origin, but confusingly marked as somehow involving "Australian artists", or "handmade with Australian traditional native art". The souvenirs are painted, or printed, in a baffling mix of geographically variant "Indigenous styles", yet even these mishmashes are themselves peculiarly similar, as though evolved from some parallel Aboriginal universe.

Hogarth, 37, says some of the designs were originally created by respected Aboriginal artists he knows, then reproduced ad infinitum by unscrupulous wholesalers. Other artists received paltry one-off payments by wholesalers who then exploited their artwork for years while depicting themselves as champions of Indigenous art.

In our fifth souvenir shop, Hogarth plucks a cheap wooden "Returning Boomerang" from a rack. It bears a sticker with an image of the Aboriginal flag, and claims to be "100 per cent handmade … 100 per cent painted in Aboriginal dot art". Hogarth pulls a face. "That's definitely misleading," he says. "This was made in Indonesia, and there's no way it will return. If you throw it, it will just keep going, which is probably a good thing."

Roughly 80 per cent of all so-called Aboriginal souvenirs we examine in six Surfers Paradise stores that day turns out to be of Indonesian or Chinese origin. Sampling in other parts of the country shows the pattern is nationwide, and that the trade in these cut-price counterfeits – pioneered by a few opportunistic white entrepreneurs in the 1990s – is now a multimillion-dollar industry involving about a dozen wholesalers and thousands of retail outlets across Australia.

Unless the imported souvenirs are falsely claimed to be authentic at the point of sale, the fake art trade isn't illegal under Australian law. But it is increasingly seen as exploitative and immoral because it plagiarises, distorts and disrespects Aboriginal and Torres Strait Islander culture, as well as robbing Indigenous artists of income and deceiving consumers, most of whom are overseas tourists.

Now, just four months out from the 2018 Commonwealth Games on the Gold Coast, industry sources say there's so much fake stuff flooding Australia that genuine Indigenous products are being priced out of the market. Politicians have joined with exasperated Indigenous lobbyists to fight the problem: a federal government inquiry into the complexities of the trade concluded in November, with recommendations expected shortly, and federal independent MP Bob Katter has called for the sale of phoney Aboriginal products to be made illegal, however they're labelled.

"If there be one thing that First Australians [should] be allowed to keep and own, it is their own culture," Katter said while introducing a private members' bill on the theme this year, adding, "I'm sick of buying for my kids clapsticks that don't clap, bullroarers that don't roar, boomerangs that don't come back and woomeras that won't mount a spear."

Surprisingly, though – given pleas for only the best and most authentic Indigenous souvenirs to be showcased during the April Commonwealth Games – it turns out the wholesaler chosen as the Games' official "gift supplier", Jabiru Australia (also known as Jabiru Boomerangs), has no Indigenous ownership or full-time staff. The Gold Coast company is solely owned by white businessman John Palombo, who admits he has never paid royalties to the Aboriginal artists he engages on casual rates, and has no intellectual property agreement with them.

Since the federally funded Fake Art Harms Culture campaign began last year, relationships within the souvenir industry have come under intense pressure. In March, Aboriginal artist and craft retailer Michael Connolly mounted a bitter attack on the wholesaler he'd dealt with for two decades at Redcliffe on Brisbane's northern fringes. Connolly, proprietor of Dreamtime Kullilla-Art, used his company website to accuse Birubi Art Pty Ltd, and its managing director Ben Wooster, of importing Indonesian-made Aboriginal artifacts "by the container loads" and "steal[ing]" the "livelihood" of Indigenous artists.

He said Wooster used Indonesians to copy images created by local artist Trisha Mason, who is paid royalties by Birubi for allowing this to occur. Connolly claimed Wooster told him and his wife, Jo, that Indonesians are "better artists of Aboriginal art than Aboriginal artists themselves … and very cheap", and that was why Birubi used them.

Connolly's attack on Wooster's company highlights how tangled and divisive the issue has become. He no longer buys stock from Birubi Art, yet at the time of writing was still leasing retail premises owned by Wooster at Clontarf, south-west of Redcliffe and just a few kilometres from Birubi's headquarters and warehouse at Kippa Ring.

Compact and fiery, Connolly is an acclaimed didgeridoo maker and player who has performed for VIPs here and overseas. Although proud of his Indigenous background, he was aware from the time he and Jo began dealing with Birubi – then run by Wooster's father, Gary – that it dealt in so-called fake art.

"When we started our business 21 years ago," explains Jo in a room behind their store, "Gary Wooster showed us his company catalogue and said, 'This is the genuine stuff done by an Aboriginal artist, and this is our non-genuine.' We asked what he meant because we were pretty naïve then, and he said the non-genuine stuff was done by backpackers in Aboriginal style. Michael said, 'What! You can't do that!' and Gary Wooster said, 'It's all about supply and demand … you guys [Aborigines] can't supply it, so we have to get it done somewhere.' "

But Connolly insists local supply has never been a problem. "The problem is they won't pay Aboriginal artists their due fees. The problem is their greed …that's why they go overseas." For him, the "last straw" with Birubi came early this year when Ben Wooster admitted he was selling Indonesian-made didgeridoos throughout Australia.

Connolly: "So I said, 'You're a f…ing wanker!' and we had a big blue." He says Wooster retaliated by cancelling an order that Connolly had placed for Aboriginal-flag products: a range of badges, stickers, caps and the like bearing images of the officially gazetted and copyrighted Aboriginal flag, which is the intellectual property of its designer, the award-winning Northern Territory artist Harold Thomas.

Birubi is one of only two companies licensed by Thomas to sell Aboriginal flag products. "And for every item sold, Harold Thomas gets 10 per cent of the wholesale price," explains Connolly. "For the last 10 years, we've spent about $60,000 a year buying Harold's products … so you can imagine what it amounts to nationwide."

That most of the Aboriginal flag products are manufactured and printed in China doesn't trouble Connolly. "Australia doesn't have the industry to do that stuff," he reasons. "And because an Aboriginal artist was getting royalties, we thought that was fair."

But his opinion of the flag designer – whom he "thought was a brother" – changed when Thomas declined to do anything about Ben Wooster refusing him any more flag products: "Harold said Wooster had told him I was a whinger, and that he didn't want to speak to me again. And I said, 'Well, in your f…ing arse!' " On his website, Connolly accused Thomas of "not going to bite the hand that feeds him", and said he didn't want to put another royalty cent in Thomas' pocket, or Birubi Art, ever again.

He ended the open letter with a vow to stop Birubi "and any others who are exploiting my culture… I am like a dog with a bone – I won't go away." Since then, he has used Facebook to name six other companies he believes are dealing in fake Indigenous products.

Wooster doesn't deny Connolly's assertions about his use of Indonesian artists, but argues he's "compelled" to do so because "a lot of the local [Indigenous] artwork just wasn't acceptable; it wasn't commercially saleable". Conversely, Wooster tells me, souvenir items painted by popular Birubi artist Trisha Mason were so much in demand by retailers she couldn't keep up with orders.

"So over the last 10 or 15 years we've trained a partner group of Indonesian artists to mimic Trisha's style. She gets a percentage … and now she's doing very well out of it, and she continues to paint for us, doing canvases mostly."

Wooster heatedly denies telling the Connollys that Indonesians are better artists than Aborigines – "That's categorically untrue!" – and claims he can no longer buy what he calls "the good stuff" (meaning handmade artefacts by recognised Aboriginal artists).

Why not? Wooster: "Because no one's got the drive [to make it]."

Isn't it because Aborigines can't compete in a market flooded with cheap Indonesian copies? Wooster: "That's codswash! Not true! Totally untrue!"

Later, in a prepared statement, Wooster says it's insulting for anyone to suggest Birubi Art exploits Indigenous artists, or deprives them of employment, "when in fact the opposite is true, with more than 10 local Indigenous artists currently engaged in lucrative licensing or royalty type agreements with our company".

Contacted at his home in Darwin, Harold Thomas dismisses Connolly as "a nitwit idiot and a no-good person". Told that Wooster has admitted using Indonesian artists for at least a decade, Thomas says, "He hasn't told me that. I don't know anything about it … well, that's their business, isn't it?"

He doesn't see it as taking work away from his own people?

"No … if an artist, black or white, creates something, and is [subsequently] provided with a means by which he can make more money … by having someone else reproduce it, and it comes back [to Australia], and I get a return, then that's what it is."

Thomas calls Wooster "a fine young man" and accuses me of "pursuing a line from a few grumbling people". Suddenly furious, he demands to know why I don't write about white people "plagiarising" the Aboriginal flag. "But no, you haven't got the guts to! You want to pick a little story and twist it around for your benefit!"

Me: "Harold, that's bullshit."

Thomas: "You can get lost!" He hangs up.

In a conference room at the Australian National Maritime Museum in Sydney's Pyrmont, Gabrielle Sullivan, chief executive of Indigenous Art Code, reminds her audience how the code came to be drawn up in 2009. Two years earlier, a Senate inquiry had heard horrifying details of elderly artists being coaxed from their desert communities to Alice Springs, then locked in sweltering sheds and forced to paint dot canvases, which exploitative art dealers promptly sold for thousands of dollars more than the artists were paid.

The code, which stemmed from that inquiry, is aimed at promoting ethical trading in Indigenous art. But because it was denied regulatory teeth, the abuses predictably continued. In the little examined area of crafts and souvenirs, things became steadily worse, and artists and community members began asking Sullivan what could be done about "all this fake crap" on the market. "I'm sorry if I swear sometimes," Sullivan tells her audience from the Museum Shops Association of Australia and New Zealand, "but it's hard not to when you're talking about this stuff."

She gestures at a table behind her, laden with samples of the garish imported souvenirs she's picked up at stores around Australia. Part of the Fake Art Harms Culture campaign devised by the code and two other Indigenous bodies (The Arts Law Centre and Copyright Agency-Viscopy), Sullivan's bad-taste shopping spree left her stunned by the extent of the problem.

She found that most shops, deliberately or otherwise, seemed to stock a bewildering mix of fake and genuine souvenirs. "It's as though they set out to sanitise the fake stuff with authentic products… even with my background in art [as arts and business manager with Martumili Artists in Western Australia] I was confused about what was real and what wasn't."

Predictably enough, cheaper items, often decorated by deliberately distorted and much-copied images for which the original artists were never paid, tend to outsell genuine products, especially in tourist zones like the Gold Coast and Cairns. Retailers can be seen to be doing the right thing by paying $150 to join the code, but only if they agree to stop selling fake products.

"Some of them actually ask if they can start up separate businesses with different ABNs to sell the fake stuff," Sullivan reveals. "That gives you some sort of insight into the mentality involved … it's all about [making money] … and profit margins are so much higher with the fake stuff because no money goes back to the artists."

Also addressing the crowd is Girramay descendant Abe Muriata, a master craftsman from the Cardwell area in far north Queensland, and one of only 10 artists who can still make jawun, or bicornual baskets, in the intricate, labour-intensive style of his ancestors. The British Museum recently commissioned Muriata to craft a jawun for its Enduring Civilisation exhibition, then flew him to London where he found himself exchanging "budgie-smuggler jokes" with museum patron Prince Charles.

Softly spoken and direct, Muriata seems about as far as it's possible to be from the machinations of the fake art world. Before the conference, he listens to Sullivan and me talking about Aboriginal artists being paid piecemeal rates to daub animals on Indonesian-made souvenirs. "Up where I come from," he offers, "most artists put their culture first and wouldn't get involved in any of this … but some people, especially city-bred people, have lost a lot of that culture. So they have to borrow it from maybe a book. Then they say, 'This is a story about the wallaby I've painted in this dot painting.' Whereas with us the spirituality is still there, and gives the story great significance, part of the landscape from where we come."

Muriata is troubled that the flag designer Harold Thomas derives income through a company that uses Indonesians to decorate its wares. "That flag has become a spiritual thing to Aboriginal people, it's how they identify themselves. So much so that they cry for it!" 

The use of Aboriginal art and crafts by souvenir wholesalers didn't catch on until the mid-'90s. A spin-off from the worldwide fascination with so-called dot paintings, it was introduced to the keepsake industry by a handful of sales reps who'd previously criss-crossed the nation peddling lines like Chinese-made stuffed koalas and miniature swagmen to stores serving mostly domestic tourists.

In the process, they grew to know the craftspeople in remote Aboriginal communities who would later be used to produce items like boomerangs and didgeridoos for the wholesalers. One of those pioneering salesmen was Michael Micallef, who would become both a wholesaler and retailer of art and souvenirs. Now working from his Gold Coast home as a picture framer, Micallef, 51, says the use of Indonesian artists to copy Aboriginal designs – for a fraction of the already modest cost – has ruined the market for genuine Indigenous crafts.

"They're going to have to either tax the Indonesian imports to get pricing parity, or ban them completely," he ventures. "Because now almost everyone is buying non-authentic stuff, and it's wiping out [employment] for many young Indigenous people."

Micallef entered the industry as a salesman for the now defunct Southern Cross Souvenirs, then owned by Gary Wooster – the father of Birubi Art's Ben Wooster – whom he describes as "a good businessman, but a bit ruthless". (As Michael Connolly tells it, Gary Wooster was himself a sales rep when he met and befriended the flag designer Harold Thomas in the Northern Territory decades ago.)

In the mid-'90s, Micallef started his own company, wholesaling boomerangs and didgeridoos made and painted by Aborigines. Micallef admits he didn't pay royalties to his artists, and that some of the names on "artist ID" labels on his products were false "because the artists also painted [on canvases] and didn't want their names on the mass-produced stuff in case it reduced the price of their paintings".

In the late-'90s, a company called Australian Icon Products (AIP) took over Southern Cross from Gary Wooster, who then joined AIP, apparently as a salesman. Micallef says it was around this time that AIP became one of the first companies to use Indonesian artists to decorate Aboriginal souvenirs.

During this period, AIP, then Australia's biggest souvenir wholesaler, started to "change the way Aborigines painted" to conform with its idea of what tourists liked. "They wanted a uniform look to everything," says Micallef. "They had like a special class they taught the artists, so that everything would look the same." (Aboriginal artist Michael McGuane tells me Gary Wooster wanted the same thing when he made dot paintings for Birubi Art about 10 years ago. "Every canvas would have a piece of paper attached, saying what background you should have, what animal, and that sort of stuff. After a while, I couldn't do it.")

Micallef believes it was this outrageous "uniforming" that led to various painted animals looking almost the same in the work of various artists: "That, and the use of so many Indonesian artists, and everything being copied and copied, led to a style that has no real connection to Aboriginal art."

In 2003, when according to Micallef both Gary and Ben Wooster were working for AIP, the Australian Competition and Consumer Commission brought an action against the company for misleading and deceptive conduct. 

It involved claims that AIP souvenirs were decorated with "authentic" and "certified" Aboriginal art, when in fact they were painted by a mixed pool of Indigenous and non-Indigenous artists, and no certification process existed. The then director of AIP was Henry de Jonge; its manager was Bruce Reed.

By May 2004, when the Federal Court gave default judgement against AIP, the company was in liquidation. According to the ACCC, when AIP entered liquidation its assets were allegedly transferred to another company called Australian Aboriginal Art (AAA), of which de Jonge and Reed were directors. The ACCC alleged AAA had also engaged in deceptive and misleading conduct involving claims about its souvenirs, but the matter didn't go to trial.

Since then, Romike Industries, a manufacturing company with a factory at Marrickville in Sydney, has taken over as the nation's largest (and cheapest) souvenir wholesaler. Like most other wholesalers, Romike imports stock from Indonesia – but on a scale Micallef says allows it to undersell everyone else.

He says his friend John Palombo (owner of the official Commonwealth Games gift supplier, Jabiru Australia) told him Jabiru paid $2.50 a time for small, boxed boomerangs from Bali, but that Romike was wholesaling the same item to retailers for $2 – suggesting it was buying them in Bali for around 50 cents. "John also brings in the bamboo didgeridoos from Bali," adds Micallef. "But not painted. He gets them painted here."

Connections pop up often between owners and staff of souvenir wholesalers which have closed down over the years, only to reopen with slightly different company names. An example, involving one of the few wholesalers to set up intellectual property rights and pay royalties to its Indigenous artists, is WW Souvenirs, Gifts and Homewares, at Banyo in suburban Brisbane.

Originally called WW Trading Company, it was established by Don Whittington, the now retired father of the current owner, Richard Whittington. For years, Don's partner in the business was Gary Wooster, who later joined the controversial AIP. "My father had nothing at all to do with Australian Icon!" Richard Whittington all but yells when I first make contact.

A number of Indigenous sources contacted for this story questioned the choice of Jabiru Australia as the souvenir provider for the Commonwealth Games. According to Janelle McQueen, an Aboriginal artist who worked for years on casual rates at Jabiru's Gold Coast factory, the company fails to meet the "ethical principles" mentioned by Commonwealth Games Organising Corporation (GOLDOC) chairman Peter Beattie when announcing Jabiru as a sub-licensee in 2016.

"The rules are that Jabiru should have 51 per cent Indigenous ownership, and/or 75 per cent Indigenous staff," she says. "But John Palombo doesn't have either of these because he's the sole owner and his artists aren't paid full-time wages, just per-item rates for what amounts to mass production." 

McQueen was herself involved in applying for Jabiru's sub-licence, and had plans to buy the company from Palombo until a row between them in 2016 ended the deal and their relationship. "My plan was to change the name to Jabiru Aboriginal, source more Indigenous products and bring in more Indigenous artists," she explains. "Unlike John, we wanted to use only artists who were able to confirm their Aboriginality."

Palombo readily admits he's never paid royalties to artists. "How it works," the Scottish-born businessman tells me, "is that I give you 100 boomerangs, then you take them away and paint them and bring them back. Then I give you $100, get a copy of your receipt, and away you go."

He insists, though, that Jabiru has 75 per cent Indigenous staff, despite none of them being employed by his company. "How come? Because the boomerangs are made by an Aborigine, and all the artwork we use is Aboriginal … the one thing we did learn from Janelle [McQueen] was to check everybody and make them prove they're Aboriginal." (GOLDOC says Jabiru isn't defined as an Aboriginal and Torres Strait Islander business.)

John Palombo maintains that he has never imported stock from Indonesia – "Jabiru does not sell anything like that" – which contradicts what I've been told by Michael Micallef, Janelle McQueen and others.

How was Jabiru selected as a sub-licensee? Peter Beattie tells Good Weekend that Jabiru's sub-licence had been issued by GOLDOC's master licensee, Matevents, after Jabiru provided a statutory declaration stating that "all designs, creations, artwork, painting of Indigenous elements submitted as [Games products] are done by our [four nominated] Aboriginal artists".

GOLDOC's Indigenous advisory group was satisfied that Jabiru "met its obligations by providing meaningful employment opportunities to local First Nations people". Beattie adds that the Yugambeh elders' advisory group was "also satisfied with the process that ensures the authenticity of Aboriginal art and products that will be sold through Matevents and sub licensees, including Jabiru". (The Gold Coast is part of the land of the Yugambeh people).

During her travels in aid of the cause, Indigenous Art Code's Gabrielle Sullivan began noticing that tourists seem to prefer keepsakes decorated in the gaudy pastiche evolved by the fake-art merchants to authentic items. "The fake stuff is [so prevalent] now that tourists have come to think it's the real thing," she says in her Sydney office. "For me, the triumph of that lie is one of the most disappointing things about this whole process."

At Katherine in the Northern Territory, Sullivan showed an Indonesian-made bullroarer to a group of senior tribal men sitting around a campfire. (The flat wooden instruments, spun at the end of a cord to create a pulsating sound, still have "secret-sacred" status in remote communities.) "One of the old men, who knew nothing about fake art, said, 'Where did you get that?' And I told him, 'From a local tourist shop here. But it came from Bali.' 

"He looked at me absolutely baffled and said, 'But how did it get to Bali?' She laughs forlornly. "The old man said, 'Get rid of it! You shouldn't even be looking at that, or touching it.' So I had to burn my fake bullroarers on the fire that night."

Sullivan stares at the collection of mutant icons that has now taken over a room within her offices and continues to grow, like something with a life of its own. "The worst thing," she says, "is that this stuff is just so bloody insulting to the people it's supposed to represent … If I could, I'd like to burn every last piece of it." 

This story originally appeared in the Sydney Morning Herald.