I disagree. I'm sure the airline could sell them, they have to make them available so there is a perception of being two sides to the "loyalty" equation.
One thing I have noticed on routed like SYD-SCL is that it presents a funny seat map with missing J seats. I wonder if there are load factors at play here and QF may be unable to actually use all of the seats on their 744. This could be affecting award availability which is notoriously poor on this route.
The tradition economics of award seats are that they are empty seats. QF shouldn't be giving up first class tickets at $16k a pop for 'free' if there are people trying to book with hard cash, hence the caveat that award seats aren't available on all flights. Airlines have their advance seat numbers pretty exact these days (or so they tell us when it comes to overbooking). Anything left they can give away, and QF has a lottery for last minute unsold seats.
Sure they could sell them cheaper, but that would likely degrade total earnings if $16k pax find out they can book the same seat for $10k. Could they have a smaller cabin? probably yes, but I agree they likely have extra seats so they can give them away as awards.