One way to decide is to look at community of interest. If two people have many similar interests then it makes sense for them to join in electing their leaders. If they have nothing in common then there's no point.

National: I definitely think there's a community of interest at the national level. The people of Townsville and of Melbourne have something in common that deserves representation, and the national level is the natural one for defence, immigration, etc..

State: Do the people of Newcastle have anything in common with the people of Queanbeyan that neither does with those of Melbourne? I don't think they do, at least, nothing important enough to deserve a government. I suppose Tasmanians have something in common, and maybe Western Australians, but nobody in the eastern states.

Region: Do the people of Armidale have something in common with those of Tenterfield, that they don't have in common with those of Wagga? (I've chosen the example because I grew up in Armidale.) My answer is: maybe a bit but probably not a lot. A common interest in particular highways, perhaps.

City: Do the people of Lidcombe have something in common with those of Cremorne, that neither has in common with the people of Cessnock? Yes, definitely: Sydney's public transport and other infrastructure, Hyde park, the harbour foreshore, just to name a few. Plenty of reason to make Sydney a government.

Shire: We're getting down to small enough units I can't pick well-known examples. Do two tiny hamlets, probably tens of kilometres apart, have something in common that one a couple of hundred kilometres down the road doesn't? Roads, I suppose, but is that enough? I'm getting out of my comfort zone here, I can't guess the answer to this one.

Town: Do the people of North Amridale have something in common with the people of East Armidale that neither has with someone from Tenterfield? Yes, absolutely, the central business district being the most important.

Municipality: How about the people of Ashfield and Lewisham (suburbs a few kilometres apart), compared with those of Cremorne (in another part of Sydney, across the harbour). They both do their shopping on Liverpool Road, perhaps, that would b something. But is it enough? I'd guess not.

Village: I've never lived in a very small town. But surely they must have a huge community of interest?

Neighbourhood: By this I mean a part of a town with a thousand or so people in it. I'm not sure it's an important unit.

Suburb: Everyone in it probably has a local shopping centre in common, maybe a park. It's probably enough to be worth considering representation.

Human: Perhaps beyond the scope of this discussion, but the lowest level is in many ways the most important. People should be able to make decisions for themselves.

So the levels marked in red are the ones I see as the most important. Depending on where you live they represent two to three candidate tiers of government.

A key point is that which levels of government are needed depends on where you live. People in Sydney have different needs, interests and associations from those living in country towns or on farms. Clean elegant systems that chop Australia up into regions of equal size are unlikely to be practical.

The levels of government I see as needed, and the levels of government we actually have, don't seem to have much in common.