Upvote:4
An Australian citizen cannot be refused entry into Australia, so no, the child is not going to be turned back. It may take some time to cross-check though, and if flagged as an Australian, departing the country without an Australian passport will be more complicated.
I would have expected some trouble when applying for the visa, which as you correctly state should not have been granted to an Australian citizen, but since it was granted anyway, you should be fine in practice.