Is there a wider State issue here?

In the second half of the 20th century regional Australia went through significant structural adjustment. Farms depopulated as agricultural productivity increased with new crops, machinery and technologies and economies of scale. Better roads and better cars resulted in larger, more dispersed regional service towns offering lower costs due to economies of scale. Towns with over 30,000 inhabitants are still growing rapidly, while many villages, once servicing a larger on-farm population, who had typically reached them by horse or push-bike, ceased to be viable.  The previous small service centres either turned to cute country tourism or ceased to exist. 

In this century the full impact of electronic communications, including the National Broadband Network, on population distribution and increasing urbanisation is yet to become fully evident.   Some think it may reverse or slow the trend to centralised services with remote working, while others see it accelerating this trend with pockets of specialisation, that requires actual human interaction, evolving.  

This could mean that State boundaries become even more inappropriate than they were in the 19th century when they were laid down, largely due to accidents of history and the British colonial love of lines on a map.  Who, in their right mind, would put a state boundary down a meandering, unstable river bank, that not only moves but splits every river based conurbation in two?  Who would use arbitrary parallels of latitude or longitude, that cut straight across natural ridges and water catchments?  

These already inappropriately chosen boundaries resulted, at Federation in 1901, in what are essentially arbitrary geographical areas, getting equal Senate representation. Thus the smaller states acquired disproportionate political clout at the Federal level.  The principal problem was Tasmania, the smallest state and the only one that has anything resembling logical boundaries.  Its access to a hundred and twelve years of disproportionately high Federal succour has resulted in a population that is simultaneously industrially-averse; boasts the lowest level of educational achievement; and has the highest unemployment rate in the country.

The founding fathers recognised this democratic imbalance and the inappropriate boundaries.  As a potential solution they included the facility to split the larger states into more Tasmania-sized electorates.  A whole chapter, Chapter VI, of the Australian Constitution provides for the establishment or admission of new states (partly aimed at New Zealand, that ultimately declined to join the Federation). Section 122 allows the Parliament to provide for the representation in Parliament of any territory surrendered by the States. Section 123 requires that changing the boundaries of a State requires the consent of the Parliament of that State and approval by referendum in that State.

Thus both Victoria and NSW could be split into smaller States, with Queensland and WA to follow as they grow larger. But given the power relationships set elsewhere in the Constitution and an increase in the number of Senators form each state, this quickly became a political impossibility.  We probably just have to recognise the problem and find ways to live with it.

As a result of its disproportionate influence in Canberra, due an arbitrary 19th century geographical allocation, formulated by someone with a map, pencil and rule in England, South Australia has also become more heavily dependent on the general Australian taxpayer, through: direct borrowings; subsidised business; welfare transfers; and defence spending, than any other state except Tasmania.  Thus it has less capacity to absorb the impact of automotive closures than Victoria, without temporary economic harm.  

Due to labour immobility, there are always temporary local impacts when a significant local employer closes.  Fortunately Australia has one of most mobile labour forces in the world. Workers in South Australia may need to be helped with retraining and/or relocation to a job in another state.  But on the whole, reducing transfer payments to the mendicant states is likely to result in overall productivity improvements, possibly at the expense of population decline.  Then the whole country will be better off.