Unlike the comparable countries of North America, and other than the national capital created after federation, inland cities that could rival the capitals did not arise in Australia. Inland Australia has possessed relatively little secondary industry or commercial administration. No inland city has been able to rival the administrative and commercial strengths of the coastal state capitals. A by-product of this early dominance was the capacity of each colony to ignore the others, except to attempt to ensure that neighbouring colonies did not siphon trade. This rivalry substantially affected the pattern of settlement and administrative relations among the state capitals.

It is, however, possible to identify sub-state regions in terms of economic, demographic and environmental characteristics to which the state boundaries have little or no relevance. The states are sometimes said to be unnecessary historical anomalies, hindering rational planning and development (see, for example, Soorley 2004). Nevertheless, the states and particularly their capitals dominate Australia’s political and economic geography. Despite a significant drift of population to dispersed coastal towns where tourism and service industries are growing, the state capitals remain demographically dominant and are likely to remain so. For example, Sydney is projected to show about 70 per cent of the population growth of New South Wales in 2031. Coastal areas are expected to grow the most rapidly in percentage terms, while inland areas are expected to continue to lose population (Transport and Population Data Centre 2004).

This relationship between country and city has a political element. It has provided the basis of an important dimension of Australian politics with the development of a continuing national political party, which has attempted to represent the views of rural residents (see Costar and Woodward 1985). It was founded on the ideology of country-mindedness: belief in the distinctiveness, value and legitimacy of rural interests founded on agrarian values and counterpoised with city interests. The city–country relationship is also expressed in state–local government relations. Rural local government is a product of colonial governments’ attempts to force local people to take responsibility for some of the costs of development. From the outset, rural communities had to seek favours from colonial governments for development to occur, and leaders emerged around the need to promote local interests (Chapman and Wood 1984). From the 1850s, the colonies permitted incorporation of local councils having taxation (rating) capability. Many local government areas have relatively small populations and hence have very limited revenue-raising capacity. The governments of New South Wales and Tasmania found it necessary to enforce incorporation in many areas. Chapman and Wood (1984:39) mention that in the mid 1980s, just more than half of all local authorities had populations smaller than 5000 people, despite some recent amalgamations of small rural councils. Local councils have generally been reluctant to extend their responsibilities by increasing their taxation revenue, and have been reluctant to combine with other councils to form larger organisations. Local government continues to exist only under the authority of state government legislation and administration. With the likely exception of the one very large council, that of Brisbane City, Australian local government is not capable of accepting sufficient effective responsibility to become a likely vehicle for regionalisation, decentralisation and certainly not devolution.

The Australian tradition of local government is one of small and subservient institutions. State governments remain entrenched in the overwhelmingly populous and economically strong state capitals. Although appearing to attempt decentralisation from time to time by transferring departments or parts of them to regional cities, and sometimes later transferring them back again, the hierarchy of state administration extends outwards and downwards, with some variation among the states, from the capitals, as it has always done. Debate about the size and strength of Australian local government has focused on economic efficiency arguments rather than power and devolution (Dollery and Crase 2006). Where devolution has occurred it has tended to be functions and responsibilities that are devolved rather than power—a situation leading Dollery and Crase to support the view that Australian local government is financially unsustainable.