Here's a quick list of why Hodge isn't in the team:
1. Age - he's almost 35. 35 year olds don't stroll into a team unless they are well established eg. Stuart Clark/Brett Lee type. Or there is a glut of injuries. Or there is no one at his spot that can play at all eg. Bryce McGain the desperation pick
2. He's a #3 - We have the most prolific batsman in Aussie history at #3 already. Even if you say he can bat anywhere in the middle, he's been competing with Ponting, Clarke, Martyn and Hussey for spots. That's tough competition.
3. He's done nothing in international cricket since early '07. Sure he hasn't played a lot of games since, but if you want a clue why he's not playing have a look at the ODI series v India in October of '07. Hodge: 6 innings, 59 runs, average 9.83, HS 20.
4. During and after his 05/06 time in the Test side, he was out caught behind the wicket playing away from his body a lot. Selectors don't like picking players with exploitable weaknesses eg. Phillip Hughes recently, Michael Bevan a few years ago. Darren Lehmann too since he got targeted with short stuff by the end of his career.
5. His figures are inflated every Pura Cup/Sheffield Shield season by one massive score. Looking at first class batting averages for the Australian season:
05/06 - average 48.52, HS 203, average without HS: 40.8
06/07 - average 85.00 HS 153, average without HS: 76.5
07/08 - average 47.62 HS 286, average without HS: 31.73
08/09 - average 61.76 HS 261, average without HS: 45.17
06/07 was his best year recently and he was unlucky not to play given Andrew Symonds was in the side. I'll comment on that later. But a guy who's average looks good because he makes a double every 10 matches is not really the guy I would want in my team. It's too random, he needed more consistent 100s.
Test Selection policy??
The only thing Hodge has to complain about is that the selectors have picked an all-rounder instead of 6 batsmen, because there is no way Hodge deserved a spot ahead of Clarke, Ponting and Hussey. Of course Hussey is arguable now, but you don't drop an aging player and replace him with an even older player. Michael Bevan was an example, he smashed records in Shield cricket, but he was in his mid 30s and it was too late. The selectors chose Clarke to be their new middle order player at that time, not an old guy like Bevan.
So it's really Symonds and Watson who have taken Hodge's spot. Since Warne retired I think we HAVE needed an all-rounder because we often struggle to take 20 wickets now and we can afford to play one since Haddin is very good with the bat. You can argue that point of course, but I think it's pretty obvious.
So it's really the time before after the 05/06 season and before the 06/07 Ashes (when Warne and McGrath finally left) that he was unlucky. But the selectors liked Martyn and Clarke better. They both came back into the side and Symonds retained his spot, someone had to go. Simple as that. Given the subsequent performances of Martyn and Clarke, it looks like a good call to me. Hodge had been out driving away from his body a few times and while he'd made a double century only a few tests earlier - tough luck. Ask Michael Slater what that feels like.
The real error was playing Symonds in 05/06 and 06/07. We didn't need his bowling with Warne and McGrath still going strongly and his batting at Test level was not great. But Australia was in the grip of Symonds fever and he was in the side almost for his popularity and fielding as for his ability.
ODI selection??
Hodge played in the '07 World Cup for a couple of games. But his last series in October of '07 in India was disastrous and he hasn't been back since. He won't be back unless there are injuries because the next world cup is not until 2011 and the selectors are only thinking about players who will be featuring in that tournament. Hodge is too old. See again, Michael Bevan for the 2007 World Cup. Still playing pretty well, but he was never going to get picked.
T20 is probably the only selection where he can feel slighted, as he would have been a worthy replacement for Symonds at this years World Cup. He was in form after the IPL, but the selectors went with White. That's probably the worst slight he has received and if that's as bad as it gets, he's done alright.