The government has the ability and precedent to direct Australian banks to cut off merchants. It's used routinely for scammers, dodgy overseas pharmacies, online gambling sites - stuff that isn't compliant with Australian law. I don't know whether the eSafety Commissioner has access to those powers, but yes - the possibility that Valve loses the Australian market has precedence.

Of course, I can't see it going that far, because I think they'd cave and comply with Australian law before we got to that stage.

“This is the first decent-sized site to show this level of resistance to the policy.” What?

Can you name another company with hundred of millions of dollars in revenue in Australia that has played this sort of game with the Social Media law? The closest I can think of was when Facebook tried to play games with Online News - and they caved and paid up for three years before abandoning Facebook News in Australia.