Dear Chrisch,
Thank you for contacting PayPal.
PayPal  is working with American Express to enable Australian 
card-members  to use their American Express credit card for transactions 
through  PayPal. The timeframe for this is indefinite.
Until it becomes  fully operational, American Express transactions 
through PayPal will  be declined.  
This means PayPal Australia users are currently  unable to transact or 
add an American Express credit card to their  PayPal account.  You can 
still add another payment method such as  Visa, MasterCard or Bank 
Account. 
We apologize for any  inconvenience this has caused and we hope to have 
this resolved as  soon as possible so you can use American Express card 
for your  PayPal transactions in the future. 
Thank you for choosing  PayPal.