The reserve is the minimum price they’ll sell for at auction. It’s sucks, but underquoting is still standard practice. You can generally add about 5% to the top of the quoted range to estimate the true asking price.
You should still make an offer and go to the auction if you want the place, but be prepared for disappointment. I’m in the same boat.
Edit: I’m in Melbourne. Maybe things are less dismal elsewhere.
Also in Melbourne trying to buy my first home