VH-NJG departed unrestricted on the Runway 19 Kilcoy Standard Instrument Departure (SID). The next departure off Runway 19 was VH-XFZ departing on a heading of 220 degrees. The departure restriction was to accommodate an aircraft arriving from the west for runway 14. The Departures Controller intended to turn the trailing aircraft (VH-XFZ) further right shortly after contact was made. However, there was a Secondary Survellance Radar (SSR) correllation problem with VH-XFZ in that its transponder did not operate until the crew recycled the selector. When VH-XFZ showed up on the SSR, it was less than 2 NM behind VH-NJG. However, the crew of VH-XFZ reported that they had VH-NJG in sight since takeoff. The Departures Controller had assumed that the ADC would provide separation of two minutes or 3 NM for departing aircraft if their tracks diverged by less than 30 degrees. As the crew of the trailing aircraft had visual contact with the preceding aircraft throughout their takeoff and initial climb, there was no risk of collision. Analysis. Under the circumstances, the Departures Controller's operational technique did not provide separation assurance. His assumption that the ADC would apply separation was the more significant factor in the breakdown of separation. Safety Result. Following the incident Local Operating Instructions were amended to define more clearly the responsibilities of both the ADC and Departure Controller in relation to initial departures.