How do rural communities manage the challenge of local governance and community capacity-building, given the policy choices of central government (both state and national) in favour of global resource-development industries? Central government policy choices expose rural communities to the vagaries of the global economy, even as the Australian government's stated intent vis-à-vis rural Australia is the exact opposite: to encourage locally driven economic and community sustainability. Rural development policy in Australia often has the effect of denying the very outcomes it hopes to achieve. On the one hand, government policies encourage rural communities to be independent, to build 'social capital', and to add value to their local produce; on the other hand, macroeconomic policies change the contexts within which these communities function, creating a tension which is difficult to reconcile. In the case of the Western District of Victoria, an established agricultural and pastoral region, the cycles of economic activity have been disrupted in recent years by new and exciting global industries whose trajectories sit largely outside local control. This paper questions whether governments have a systemic view of the impact of these competing demands on rural communities, and calls for a more informed, whole-of-government policy-making for the development of Australia's rural regions.