It's something I've been seeing increasingly often myself, from quarters you wouldn't necessarily expect. The Herald's story cites Deborah Abela, an Australian children's author, who blamed "spell check and text message abbreviations" for the poor showing. While technological assistance is probably a factor in the decline of spelling ability, it won't be for a decade or two until the scope of such effects really become evident.
This isn't just a problem in Australia, either. It's systemic. Rarely a day goes by when I don't come across some error of language. Witness those TTC extended-service ads which used "everyday" instead of "every day" and were everywhere, and which I personally complained about to TTC Chair Adam Giambrone. Sure, part of it's no doubt due to the crutch effect of technological aids. Beyond that, though, there's a lot of damage that can be done to the language through laziness and simple ignorance.
If you've spent any time at all on the internet, you've probably seen someone write "should of" when they mean "should've." This is a simple problem of ignorance compounded by the nature of the language. "Should've" and "should of" both sound the same, and if someone is more used to speaking than writing, when it does come time to write it's easy to understand that they'd go for the familiar, unaware that it's wrong.
I see this in Toronto a great deal, too. One of our main east-west streets and the gateway to Midtown is Eglinton Avenue, named after a village that once stood where the intersection of Yonge and Eglinton is today. In the 1820s, a clerical error transformed "Eglinton" into "Eglington" - this was not the first time a city was named for a misspelling - and it wasn't until sixty years later that the extra "g" was finally removed.
One "g" good, two "g" bad! Also, gotta love that there Vitrolite.
That hasn't stopped people, though. The common pronunciation in Toronto seems to skew far closer to "Eglington" than it does "Eglinton." With the error maintained in the spoken word, it's no wonder that the extra G keeps appearing where it's unwelcome. The new automated announcements on the subways and buses use the correct pronunciation, though, so there's a fair chance that the proper spelling will be cemented in the years to come. Right now there are two million hits on Google for "Eglinton" and only 207,000 for "Eglington" - and only that because there apparently are a few people with the surname Eglington.
Strangely enough, there doesn't seem to be any similar problem with spelling "Etobicoke."