No, Australia isn't in it... they're just going to die... horribly... by 20 goals... and scoring NIL.
In the 1958 World Cup in Sweden, the Swedish press (bork bork bork) labeled Group 4 the "giganternas kamp" as it contained Brazil who were expected to win the final, the reigning Olympic champions the Soviet Union, Austria who was the 3rd placed nation from the 1954 World Cup and England who at that stage were still seen as formidable because they had never won a major tournament.
The actual term Group Of Death (grupo de la muerte) came in 1970 which featured reigning champions England, Brazil the 1962 runners-up Czechoslovakia, and Romania.
The Group of Death then, is one where at least one major nation will be knocked out during the group stage and since the 1974 World Cup in West Germany, the top nations have been seeded to ensure that they get the best run and as a result, try to stop major nations from being knocked out early.
However, where one stands depends on where one sits and because we can only see the world from where we are, we tend to assume that we're always on the wrong end of the stick. As George Vecsey in the New York Times once pointed out:
In soccer, every nation always thinks it has been stiffed into the toughest pool, the Group of Death.
- New York Times, 16th Aug 2007
That though tends to affirm the Law of Banks* states that "the other line always moves faster", which itself is a statement of self-referential bias.
It was always going to be the fact that Australia was going to draw one seeded team, since there was one seeded team in every pool. It was also likely that Australia would face at least one other non-seeded European team, since there were seven of those for eight pools. That only left one other team in the pool and Australia by virtue of being the second lowest ranked team at the tournament would always find that every other nation which it was going to draw would be better.
If you are the second worst team in any tournament, then you should expect to be knocked out early. Unlike say the Rugby League World Cup, the rest of the world actually cares about football and as a result, there are lots of nations in the world which are simply better at it. As it is, a player like Sergio Ramos probably has a transfer value worth more than the entire A-League.
It would be like if I suddenly found myself in a grand slam tennis tournament up against Rafael Nadal. I would quite frankly expect to lose the match 6-0, 6-0, 6-0.
I don't think it's unreasonable then for Australia to lose its matches in Brazil in 2014, 3-0, 9-0 and 8-0. Both the Netherlands and Spain I think are so much better in talent and skill and with the added motivation they they'll need to score as many goals as each other to ensure that Chile doesn't accidentally take their ticket out of the group stage, that they will both hit Australia hard and often and I just don't think that any defensive back four which Australia is even capable of starting will provide a great deal of resistance.
I don't Australia is in a Group Of Death, I think Australia is a very small minnow in a pool with two very very very big fish and will be chewed to pieces. The only death then will be Australia... and Chile's.
*unlike Cole's Law which is thinly sliced cabbage