In 1292, Marco Polo was waiting for the winds to shift so he could leave Sumatra and return to Venice. He spent his time learning about an island called Java, in the southeast. Everyone said that it was the largest island in the world, it had a great king and was very powerful. It has vast sums of wealth and its great spices. (https://www.youtube.com/watch?v=bZKHATDgPO0)
The Java we know today is definitely not the largest island in the world. However, Australia could be categorized as the largest island of the world. The Sumatrans obviously knew that Sumatra was bigger than Java. Were they perhaps actually referring to Australia?
First of all, Australia was known far before Europeans arrived. Papua New Guinea, Sulawesi, Srivijaya, China, Tamil kingdoms and even African Islamic kingdoms have traded with Australia! Even coins from Africa were found in Australia(http://www.digitaljournal.com/article/350471)!
So, were the Sumatrans referring to Java or Australia?
As a counterargument, Java IS the largest island in the world… population-wise. I don't know if it was as populated as it is now, though.