If I have multiple subfolders that I wish to target at different countries, I'm thinking the ideal set up would be to specify rel="alternative" hreflang with a language AND country code (e.g. en-AU) and ALSO to geotarget that subfolder to the particular country.

That way, the pages would be showing up both in the country-specific results (accessed via Search Tools) because of hreflang, AND the more generic country results from regular searches, because of geotargeting.

Is this correct?

p.s. What would happen if you geotargeted a subfolder which had e.g. pt-BR hreflang value (i.e. Portuguese-Brazil) to just Portugal?

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Quite an interesting question, I don't think I've read any thing where people talk about using both Geo targeting in GWT and hreflang. I think it should be fine, as like you mention you can only Geo target a country in GWT, but with hreflang you can go even deeper and target specific spoken languages in those countries.

With regards to geotargeting a subfolder to a different country to the hreflang value, I'm pretty sure the hreflang would be ignored and the geotarget would take preference. Im my experience, while hreflang is great in throery, I often see them not working as they should, so their 'signals' I believe aren't that strong.

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