Provided they didn't mess up the math, every single applicant who receives an interview has a non-zero chance of receiving an offer. In past years if this chance was <5% and you were coming from interstate UNSW actually had the courtesy of telling you this estimate in advance so you could weigh up the costs of flights/accommodation vs chance of an offer. I'm not sure if they still do this.
It's a difficult balance to achieve - interview too few applicants (e.g. 200/300) and you'll only be selecting for students with even higher ATAR/UCAT (as if they weren't high enough already) and potentially missing out on students with still excellent academic results but have something special to offer for the interviews. Invite too many and like you said, you get a lot more rejections and "wasted" time/effort. Ultimately most of the unis across Australia have ended up with a 1:3 ratio, with some going up to 1:4.