The way I see it they are going to get worse... that's just the way it goes. It does exasperate me when you get tournaments like this WC where they just bulldoze near enough everything, but that's the game I suppose.
West Indies 1976-1986 were no different really. Though of course Global coverage and general awareness was much, much lesser in those days.
Cricket is a cyclical game. People can only be as good as Australia have been for almost all the last 16 years for a finite time. That time may be about to come to an end for Australia, it may not. There's certainly more of a chance of it in the immediate future than there has been for most of the last 16 years.
Obviously they will get worse. As you said, cricket is cyclical - each team goes through a phase of establishing its lineup, experimenting and finding the best possibly combination. Then it goes through a phase of reaping the benefits - trying out that combination against the other teams who may still be in experimental phases, while occasionally making minor changes based on performances at domestic at international level.
But, the question is - just how much worse will Australia get? And for how long? Personally, I don't think they'll decline enough to be knocked out of say, the top 3, for a very long time unless the other teams improve. While the cyclical nature of cricket may see a team like New Zealand range from 8th to 3rd - I think Australia may just find themselves ranging between ridiculously dominant and 3rd. For the very structure that Australian cricket is built on is what is makes Australian cricket so great - not a freak bunch of superbly talented players. People like Warne, McGrath, Ponting and Gilchrist do indeed fit into the latter group, however they have simply been the difference between Australia dominating and Australia just being a good team. Players like this come along quite randomly and you can't rely on them - all countries will have great, naturally talented players in them at one stage or another - but it's the development and success of players like Damien Martyn, Jason Gillespie, Darren Lehmann, Justin Langer, Michael Kasprowicz etc etc that really sets Australia apart from other countries at the moment. For you see - these players aren't "flukes" - they weren't lucky guesses, or plucked out of obscurity based on rare talent. They were just good players at first class level as a result and a product of Australia's exceptional development system at junior levels and strong, competitive first class structure. There are few flaws in the system - if you're a good player, you simply progress through all the grades right down from your local club to playing for your country. Bias is minimal, and any players with talent are generally spotted early and developed from a fairly young age. And even if not, they still manage to pop up in first class cricket and develop there. Now, just from doing a fair bit of reading, the only country that comes anywhere close to reaching Australia's professionalism in junior cricket and first class domestic structure is New Zealand - which would explain their continually good performances at international level despite having a very small player pool.
Whether you like it or not, Australia are going to keep producing the Damien Martyns and Jason Gillespies of the world by the hatful - in fact, there have been quite a few come and go recently that simply haven't got a look in who would have done just a good a job - the Hussey case backing this up perfectly. Guys like Martin Love, Brad Hodge, Andy Bichel and Simon Katich got limited opportunities but showed essentially the same. Unless other countries can find an answer to players of this calibre by improving their own lower levels structure, Australia will continue to have a very good side even at its lowest points. Losing Warne, McGrath, Gilchrist etc is always going to send a side into decline, however I feel the decline will be fairly minimal in the grand scheme of things.