Real estate agents often use auctions as a way to sell properties when they think the owner has too high a price in mind. There are some really interesting articles about comparing private sales to auctions, available online (try the usual suspects like realestate, domain).

In Melbourne, it really depends on your area. The more expensive areas like inner East (Hawthorn, Camberwell, Balwyn, Kew) and inner South East (Brighton/Hampton) often sell by auction because it gets the most buyers in the one area at the one time. The less expensive areas often sell by private sale (most of the North, outer suburbs).

Also check out what your agent charges for sale by different means.

I bought my current place before the auction, gave them an offer they could not refuse. Mine was an estate auction with seven beneficiaries of the will, so they didn't really care what it went for, they just needed it gone. But I'd looked for 18months prior...

Good luck and do your research.