This is the reality and it does happen everywhere... but I think the OP's question surrounds whether staff should take priority over fare paying passengers and IMHO, they should not, other than for duty travel (where the company requires them to be somewhere) and not simply staff travel for any other personal reason. The reasons are two fold. People fly and accrue FF points with the expectation that they can redeem them for upgrades, meaning QF has earnt revenue from these passengers and in doing so, it incurs a future liability that must be remedied at some point. I think it is better to reduce this liability and reward a passenger that contributes to your bottom line.
Why shouldn't they? They make representations that they will give preferential treatment to their FF passengers, the higher the tier, the more preferential the treatment. Clearly they cannot upgrade everyone for the reason you describe, but what is the point of flying empty J seats (@T-15) when you have 'x' passengers willing to redeem some FF points for an upgrade that has 3 benefits of pleasing the passenger, filling the seat and reducing a future liability?. QF have made attempts to remedy this by offering ODU's and again the OP is asking whether fare paying passengers receive priority over staff, and as ive said above, I think they should.
I dont know where to begin other than to say you are flat out WRONG. Non duty staff travel is NOT an entitlement, it is a benefit, offered on a space available basis, exactly like passenger upgrades, which again goes back to the OP's question about who has priority. The benefit (not entitlement) varies between employee groups but no employee (there may be exceptions for some) receives staff travel until after their 6 month probation, other than to their home city if they have been forced to relocate. Pilots specifically, then have access to F/J/Y staff travel and can elect to confirm it twice per year, at a higher fare, and unlimited space available travel in all classes at all other times, so there is no need for you to remind anyone that it takes years and years of service before ANY (your word) staff member can access J because you are PLAIN WRONG. IIRC, it takes cabin crew 7 years before they can access J staff travel, but your point is moot. Also, if a staff member buys a higher cabin fare, it can be used for travel in a lower class (but not higher) and my understanding is that there is no refund, hence, staff buy multiple tickets in various cabins and use the appropriate ticket on the day, and submit the unused ones for refund when they return.
This is very subjective and may I say, completely pointless. I know staff that dont travel Y at all and others that only travel J/F longhaul and aren't fussy with domestic Y and others that travel in the best cabin they can get on their preferred travel dates. I do agree that J revenue pax will not/should not be removed for staff and I doubt this happens other than in exceptional circumstances.
All being said and done, you really should reconsider posting with such authority on matters that you seemingly know little about.
Just my 2p worth......