I don't think so. How would a couple of extra cities on the Queensland north coast, for example, be 'fatally damaging' to Australia's ecology?
The alternative is to live in cramped cities, huddled together like sardines as we do now, for fear of damaging the precious ecosystem.
It would be great to develop more large cities around the coast (eg Geraldton & Esperance), and this would provide higher living standards than acommodating another ten million in the western suburbs of Sydney and Melbourne.
The areas considered the 'best' suburbs in Sydney and Melbourne were settled by WWII. You could build high amenity suburbs in regional cities. Or keep going as we are in expanding our capital city fringes.
The former regional development approach is probably 'best'. But it's more expensive than the latter due to the increased power, water, transport infrastructure, etc. Plus without a large economic base it is extremely difficult to promote development in other than the established capitals.
There have been many attempts by governments to encourage large-scale regional development and closer settlement in agricultural areas (which was predicated on reliable rainfall and land productivity that didn't exist).
In the 1880s railways were built to every small town supposedly to encourage development (but often to enrich land speculators). Instead they just improved communication with the big cities.
In the 1920s governments encouraged soldier and group settlement schemes to develop the countryside. Many walked off the land.
In the 1950s governments encouraged farmers to overclear land in marginal areas beyond Goyder's line (and its equivalent outside SA). Salinity and erosion were the result.
In the 1960s BA Santamaria advocated for an Australia full of virtuous peasant farmers from Europe on small holdings as this would be a counterweight to the moral decadence of the growing cities. Such farms were never viable and irrigation had its own problems.
In the 1970s Gough Whitlam and Tom Uren established DURD to grow Albury-Wodonga, Orange-Bathurst and Monarto (SA) as large inland cities. The latter did not happen, and the first two only ever took a few days of big city population growth per year.
In the 2000s immigration rules gave priority to settlers for smaller states and cities (to relieve pressure on Sydney). They didn't have much of an effect.
100 or more years ago immigrants often flocked to the country (Chinese after gold, Pacific island labourers in Qld). But now immigrants overwhelmingly flock to the major cities. As do Australians, especially those with degrees and professional qualifications eg doctors.
The Australian pattern of development around five big cities has endured for over 150 years and shows no sign of letting up, no matter how undesirable this might appear to be. Successful regional cities eg Geelong, Ballarat and Bendigo are growing no faster than Melbourne.
And government rural development schemes or using immigration as a tool to encourage regional living doesn't seem to have had a successful record either.