Hervey Bay's climate is pretty kind to hot water systems. Mild winters mean cold-tank inlet temperatures are higher than down south, so almost any system here will run efficiently. The real question is what fits your home, your budget and how long you plan to stay.
Electric storage
Still the cheapest to install (around $1,400-$2,000 fitted) and the simplest to replace. The catch is running cost. An electric storage tank for a family of four will run $700-$900 a year on grid power. If you've got solar panels, that drops significantly because you can time the heating element to run during the day.
Gas
If you've already got natural gas to the house, instant gas is a good option. Lower running cost than electric (around $400-$600 a year), no tank to corrode in our salty air. Install is around $1,800-$2,400. The downside in Hervey Bay is that most homes don't have town gas, so you're on LPG bottles. Bottle gas works fine but adds the hassle of swap-outs and a higher per-megajoule rate.
Solar hot water
Roof-mounted solar panels with a tank either on the roof or at ground level. Capital cost is higher ($3,500-$5,000 fitted) but running costs drop to almost nothing in Hervey Bay's sunshine. Most systems still have an electric or gas booster for cloudy stretches. Payback is usually 5-7 years.
Heat pump
Our pick for most Hervey Bay homes built in the last 15 years. Uses about a third of the electricity of a standard electric tank because it pulls heat from the air rather than generating it. Install is $3,200-$4,500 after federal STC rebates. Combined with solar panels, running cost is near zero. The trade-off is they're noisier than a regular tank (small compressor unit) and need clear airflow around them.
The short answer
If you have solar panels: heat pump. If you don't and you're staying long-term: solar hot water. If you're renting it out or selling soon: just replace like-for-like with electric. Whatever you pick, get three quotes and check the installer is QBCC licensed for both plumbing and electrical work.