The Oz Hornets were 'assembled' in Oz from components sourced from the US, Spain and Oz.
The Australian built components were built under sub-contractor agreements with the US
manufacturers under specific US government foreign military support rules. Extending the
program would have required a lot of negotiations between all parties. Turning the operation
into a true manufacturer of the F-18 would have required a whole lot of money and major
agreements.
The major differences between the A/B series and the C/D were equipment rather than structure,
it was a block number re-designation, so if McDonnell were willing to continue supplying major
structural components, it wouldn't have required major changes in the Oz production facility.
Aside from the political considerations the big if would have been the McDonnel board, literally
in the name McDonnell, based on history, they would not have been interested in creating a
competitor.