The problem is infrastructure. Public transport, essential services, transport network. The governments are incompetent and don't take rural areas seriously... the Black Saturday fires show that the Victorian government can't even provide critical emergency services to outlying towns.
Sydney is another fine example.
I agree with you that Rudd's "Big Australia" is not what this country needs. He needs the stimulus from immigration to cover up his economic mismanagement. In the rush to attract talent, not enough policing was being done to ensure PRs were of the proper quality. It's a good thing that is being addressed now. In 20 years time, I believe Australia will resemble the US or Singapore... and that's not a good thing.
Again, infrastructure. Hard to attract migrants to live in a place without amenities. Those who migrated under the regional sponsor scheme usually leave after their 3 years are up.
Aiya, no matter how tight the migration policy is, there'll will always be the dodgy one gets into the country. If every immigrant is highly skilled, then the question is would there be enough quality jobs to go around? U need people to do the lower-end jobs that no one wants to do as well. It cuts both ways, don't think there is a solution around it.
As for regional migration, i think most Sporeans will not be able to take it cos they always think so highly of themselves. Guess what? the PRCs, indians, phillipinos, thai, viet would gladly take those visas and worry about moving to the city later. Its' thats a will, thats always a way.