As was mentioned by @FelixIP, you need to ignore the Z Factor. Leave it at 1.
From the documentation:
If the input raster is in a spherical coordinate system, such as
decimal degrees, the resulting hillshade may look peculiar. This is
due to the difference in measure between the horizontal ground units
and the elevation z units. Since the length of a degree of longitude
changes with latitude, you will need to specify an appropriate
z-factor for that latitude. If your x,y units are decimal degrees and
your z units are meters, some appropriate z-factors for particular
It seems that this is where you got the value of 0.00000898. However, if your latitude is at -28 degrees, then, it seems reasonable that you should have used the value for 30 which is 0.00001036. However, that is only if your x,y coordinate system is in decimal degrees.
You're using the projected coordinate system GDA_94_MGA56 which has x,y units of metres. Therefore, you can use the default value of 1 because the elevation of the DEM is also in metres (presumably).
Also from the documentation, the z factor is the:
Number of ground x,y units in one surface z unit.
The z-factor adjusts the units of measure for the z units when they
are different from the x,y units of the input surface. The z-values of
the input surface are multiplied by the z-factor when calculating the
final output surface.
If the x,y units and z units are in the same units of measure, the
z-factor is 1. This is the default.
If the x,y units and z units are in different units of measure, the
z-factor must be set to the appropriate factor, or the results will be
incorrect. For example, if your z units are feet and your x,y units
are meters, you would use a z-factor of 0.3048 to convert your z units
from feet to meters (1 foot = 0.3048 meter).