Um... those who don't know NSW road laws should STFU a bit.
When driving an unregistered vehicle in Vic (in order to get it fixed for RWC etc.), one needs to obtain and display an unregistered vehicle permit.
In NSW, no such thing exists.
Current  law says you may just drive the vehicle unregistered; if stopped by police, you have to convince them that you are, indeed, driving only for the purpose of repair for registration.
Previously, the law required you to display plates showing the word "traffic" in place of your numberplates. Why the word "traffic"? Who knows. Just one of those things.
This law probably ended decades ago, but people still do it. It's probably knowledge that is passed from father to son. "When I took the old '57 Woolsley to get it registered, my Dad told me I had to...". It's like the knowledge that one has to give way to the right at a roundabout. It used to be the law, so people assume it still is.
It's also fairly common practice for those who just want to drive cars that aren't registered. "Y'know, mate, if you write "traffic" on your number plate, the cops can't do anything about it! Serious! A bloke at the pub told me!".
Point being, though, it's not at all uncommon in NSW to see unregistered cars on the road with "traffic" in place of a numberplate. There is no conspiracy or intent to decieve people into thinking that they have the much sought-after personalised plate that bears the same word.
 as in, last I heard when I last lived there 15+ years ago