Three-drops water radical on the left — the side-form of 水. Indexes 澳 in the water family with 湾 bay, 港 harbour, 浦 inlet. The original meaning was a deep curving bay or sheltered cove — exactly the kind of coastline that gave Macao and Australia (澳大利亚) their abbreviations.
Right side 奥 supplies the sound ào directly, no drift. 奥 alone means "deep, profound, hidden inner room," which doubles as a faint semantic hint: a deep bay is a hidden recess of the coast. Same phonetic appears in 懊 regret and 噢 oh.
