"So no-one should ever say anything about anything or anyone?"
No one is saying you can't say anything about anything or anyone. Say what you want, but if you are saying it publicly and it denegrates a group of people you'd better make sure it's accurate and not just a blind statement of ignorant prejudice. fact is, if you are making sweeping statements, chances are it's exactly that.
For example, if I said all poms are fuckwits, I'd simply be wrong, even though I know poms who are fuckwits.
"The whole "you aren't one of them so you can't comment" argument is bullshit."
It is bullshit, and nothing in the legislation says that.
One of the biggest problems is that people will say things like "that person behaves badly because he is aboriginal". Well you simply can't say that. If one indigenous Australian doesn't act that way your argument is shot down, then and there, on the basis of simple logic. It's proven wrong. And you can't possibly know all indigenous Australians so you can't possibly know that. And because that is actually the case that it is wrong, you should never say it. It's simply wrong, it shows ignorance on the part of the person saying it and it villifies an entire race of people.
So, you can say there are lebanese criminal families in Sydney, because it's true, it's a fact. You can't say all Lebanese are criminals because it's not true. Lebanese are not racially disposed to crime.
A lot of the adverse social problems in the indigenous community are caused by low education levels, poverty and social exclusion. It's not because of some innate indigenous genetic flaw, it's because of 200 years of social exclusion and discrimination, and a lack of acceptance by white Australians that there is more than one valid mode of living. Every time statement like "aboriginals are all losers" is made, it perpetuates and reinforces discrimination. If people are too ignorant or prejudiced to bother finding out about the diversity and richness of indigenous culture, then indigenous people need the protection that this legislation affords, in order for them to grow out of some the social problems they now experience.