That word is used in a different manner in Australia. It's not such a harsh word there like it is in the USA and it's often used as a term of endearment there. Personally, that word is not usually in my vocabulary, but since he's from Australia and has been using it, I used it back with him. And we are just joking with each other.
Another example is like when Texans call each other "you son of a bitch" as a term of endearment. Seinfeld had an episode involving that phrase with George Costanza and Texan businessmen, lol.