Economy built on: business migration (entrepreneurs), student migration, mining services, manufacturing exports (by building free trade area), and possibly defence base nearby.
Hmm, people who live in Australia may know of the situation that we have here. There is a massive population in Sydney (many say it is overpopulated in fact) while places such as the north are barely populated. If people were needed for creating a new city, perhaps the government could start advertising especially to the people in overpopulated areas instead of getting people from other countries? Secondly, there is a MASSIVE shortage of people in the mining industry. Western Australia is suffering due to the shortage as it is, creating a new mining area would only worsen the situation they have there.
Now addressing the question, there are pros and cons to this (as there is to everything). Before that however, I want it to be noted that any country preparing for an invasion on Australia will be prepared to fight in the open deserts and in the cities. Countries like China and India both contain deserts and many exercises are carried out there often.
Pros:
As long as our intelligence is spot on, we'd be able to notice an incoming invasion (which isn't too hard I'm going to guess, seeing as a successful invasion on Australia would require large amounts of fighter jets, bombers, cargo aircraft for paratroopers, and at least one Aircraft Carrier). This means we'd be able to dig in, and wait for reinforcements to arrive from the US. Supplies and everything like it can be daily moved from the city to any Defence Bases.
Cons:
Expensive.
Time consuming.
Building a city would use a LOT emit a lot of carbon emission (Australia is one of the worst countries for the amount of CO2 is produces per person).
Another thing to keep in mind is Australia's armoury. We only have 59 M1 Abrams tanks, 250 ASLAVs but a hell of a lot of Bushmasters and M113's. Now I'm not exactly sure about how battles are fought in the desert, but I've got a feeling that tanks would do a lot better than IFV's. It's Australia's strategy to be a light, mobile army I guess.
If we didn't have a city up in the north, I guess it would mean the enemy would not have any infrastructure or anything of the sort. That makes them vulnerable to aerial strikes. OTOH, if we did have a city up in the north then our chances of repelling an attack or at least keeping the invaders busy while America sends help would increase.