This isn't a universal problem. Some users run Word 97's Australian English dictionary without a hitch, but the Help Screen has received a number of queries on this issue. If you have been having trouble with your Australian dictionary, read on!
If your spelling preference is for "colour" rather than "color" and "realise" rather than "realize", you will want to replace the US English dictionary with its Australian equivalent. This should be a simple enough operation: use the Set Language command (Tools--Language--Set Language) to change the default language to English (Australian). But for many Word 97 users, this doesn't fix the problem. Despite the reassuring message ("This change will affect all new documents based on the NORMAL template") you may find that Word is lying through its teeth. You can ditch the US dictionary for the current document by selecting all your text (<Ctrl>-A) and then changing the default language. But as soon as you start a new document, Word will hoist the stars and stripes again.
Trawling the Microsoft Knowledge Base, I discovered that Word 97's default language is based on the current keyboard, as defined via the Windows Control Panel. So if your keyboard is configured to use English (United States), you are stuck with the US English dictionary. In this case, Word's Set Language command won't have any permanent effect. The logical next step (or so I thought at the time) was to add an Australian English keyboard and make that the default. I tried this on my system and was pleased to find that I could then reset Word's default language to Australian English and make that setting stick. I was less pleased to discover when I tested this setup that "colour" and "realise" were still being flagged as errors!
More research revealed that Word 97's Australian English dictionary has a "bug" (a wonderfully flexible term). Microsoft's recommended way of curing Word of its linguistic confusion is to make British English your default keyboard. (New Zealand English works too, if you prefer to stay local). To do this, open Control Panel, double-click Keyboard and select the Language tab. Click the Add button and select English (British). Then click the Properties button and change the layout to United States. (This last step is required in order to avoid problems with the British keyboard layout, which is slightly different from the Australian). When you restart Word, change the default language to English (British) and you should find that the new setting persists.
- Neville Clarkson

You can add a new keyboard via the Keyboard Properties dialogue box