You will get organic results that are .au domain or hosted in Australia which is what the SEARCH preference is. Search preference is for organic, algorithmically determined search.
That is DIFFERENT from paid adverts. One is determined by the algo, the other is determined by who expects a ROI for paying their advertising dollar by targeting that market for customers. Different criteria, different program entirely.
Another thing - you say virtual office. Well, if you mean virtual assistant, the very crux of that service is that that the service can be and usually is remote so physical location of the provider doesn't mean squat. If someone provides the service in a locale then they DO belong in the results. The way the algo works they won't come up in organic search, so they need to do Adwords.
Frankly, it sounds like the bidding is higher than you like so you'd like to eliminate the competition that isn't physically located there. But the service may not warrant it the way you want it to be, and it's satisfying the searchers/customers that's the purpose, they're the ones who pay for the advertising.
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This means, as a sponsor, I have to bid higher amounts against irrelevant offers to obtain position.
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If they provide the service there then they are not irrelevant.