The Australian team draped its boxing-kangaroo flag from balconies at the Athletes' Village on the shore of Vancouver's False Creek. (CBC)

The Australian Olympic team will be able to fly a giant flag of a boxing kangaroo from its balconies in the Olympic Village, after striking a deal with the International Olympic Committee.

Australian Olympic Committee spokesman John Coates said the Aussies will have to register the image with the IOC as an official mark for their team.

"We will need to register the boxing kangaroo with the IOC as the third identification we have. We already have the coat of arms and the rings, which … the athletes wear on their uniforms. We also have as a marketing identification the Australian flag and the rings," Coates said. "We'll need just to work out how we register or deal with the boxing kangaroo."

Last week, during an inspection of the village, a representative of the IOC asked the team to take down the 50-square-metre flag, which is emblazoned with a kangaroo wearing boxing gloves, because of trademark issues.

'The boxing kangaroo means a lot to our athletes.'—Australian Olympic Committee spokesman John Coates

The Australians protested, saying the flag is associated with their country's sporting success.

The boxing kangaroo image first came to prominence when it flew from the winning Australian sailboat in the 1983 America's Cup yachting competition. The Australian Olympic Committee now owns the image's trademark and uses the figure as a team mascot at both the Winter and Summer Games.

The Australian athletes are happy about the outcome, said Coates.

"The boxing kangaroo means a lot to our athletes. It features on their suitcase, on their backpack and their computer carrying bag, and they certainly associate well with it."

Flag shop overwhelmed by demand

Meanwhile, the owner of a Vancouver flag shop said she is scrambling to find a way to offer smaller versions of the boxing kangaroo flag after the controversy sparked an instant demand.

But Susan Braverman, who owns the Flag Shop, said it is not just the unofficial Aussie flag that is in demand. She and her staff have been run off their feet since New Year's selling flags from all around the world to Olympic supporters.

'Someone comes in and says, "I need 200 Switzerland hand-held flags right now." ' —Flag Shop owner Susan Braverman

"January was the busiest month in the history of the company and February — it's unbelievable, it's mind-blowing," she told CBC News.

Braverman estimates they sold more than 100,000 flags over the past six weeks. The most popular flags are the Canadian and U.S. flags, but flags of powerhouse Olympic nations from Europe are also in demand.

"Someone comes in and says, 'I need 200 Switzerland hand-held flags right now.' I mean our seamstress worked all night," said Braverman.

Braverman has 7 seamstresses sewing flags, in addition to 13 other staff members helping to stock them and sell the orders. Customers were going out the door with flags from France or Italy, but they also wanted the flags from Uzbekistan and Kazakhstan.

Carl Jonker from Langley was in the store last week to buy a flag for some Olympic guests.

"We have a Dutch family staying with us with their son [who] just got picked to the Dutch Olympic team. So we thought we would get some Dutch flags to decorate the table with," said Jonker.