Yes, the delineator, (double-dashed line at right-angles to the kerb is there to separate the two sets of bays, one for residents the other for pay parking, but the signage is not good. In cases like this, the recommended signage that eliminates doubt, (or almost !!), is for the two bay signs to be mounted side by side on a single pole where the bay delineator line is, with each sign's applicability indicated by an arrow, (left or right pointing).
I suggest you submit representations on this basis, and post up their inevitable rejection when you get it. Make sure you emphasise that you are a resident with a permit. Why an inevitable rejction, ? Because councils know from previous experience that most people cough-up when they get rejected, not knowing the law and regulations, to get the discount and, frankly, to make it all go away.