I am travelling back from Canada to Australia, and have a 7 hour layover in Shanghai.

Maybe if you rush it, but from my experience I would allow around 2-3 hrs for getting through customs. They let you wait around idle for quite a while. I think we waited 1.5 hrs in a room with the other travelers going to New Zealand, thereafter was more checking and mouth swapping etc.
And also check if you need a visitors visa if you do decide to get out to see the city.