As maverick online retailer Ruslan Kogan has pointed out, you can buy an HD set-top box at retail for $49. The going rate to have someone visit your premises to plug in and set up a TV is about $100, so let's assume that will cover set-top box installation and setup.
That's $150 at retail, and you'd imagine the Government's buying power should push that down further, or allow for a higher quality unit at the same price.
What about the antenna? That's where it can get expensive. A simple replacement might be $120, a more complicated installation could cost $500. Of course, not everyone qualifying for the program will need antenna work.
My suspicion is that the Government is budgeting on the high side just in case more antenna work is needed than actually expected. After all, in the current climate it's especially important to come in under budget than over.