Speculative claims about Australia

Why do some countries keep all their people in a small number of large cities?

A good example of the relationship between climate variability and human population size is provided by Australia.  It is unique among the larger nations in consisting of either very small settlements or large cities, for the middle-sized towns that predominate elsewhere in the world are almost entirely absent.  This is a consequence of the cycle of drought and flood that has characterized the land from first settlement.

Small regional population centers have survived because they can batten down the hatches and endure drought, and large cities have also survived because they are integrated into the global economy.  The resource networks of towns, however, are smaller than the region affected by climate variability, making them vulnerable to swings in income.  Typically, what happens is that, as a drought progresses, the farm machinery dealership and and automotive dealership close down...When the drought finally breaks, these businesses do not return...instead people travel to larger centers to buy what they need, and in time end up moving there.

The Australian example shows that climate variability has in fact encouraged the formation of cities: Today it is the most urbanized nation on Earth. 

That is from Tim Flannery's The Weather Makers: How Man is Changing the Climate and What It Means for the Earth.  A few passages make me wince, such as the romanticization of 18th century Scottish highlanders, but mostly it is the best popular science book on its topic.

My IRT ("introspective regression techniques") support Flannery's implicit prediction.  Think about all that empty desert in Saudi Arabia, although I wonder why the rather wet Uppsala is so dull.  Opinions?  Do we see concentrated population in major cities where it is driest and where the weather is most variable?  I don't recall that Ades and Glaeser mention this factor, but surely it deserves more study.