I'm surprised that Hobart and/or Tasmania in general isn't more populated. Is its climate too cool?
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Not at all, the climate of Tasmania is excellent. The problem is probably the isolation (even in terms of Australia... Tasmania is relatively quite far south and separated from the mainland by a stretch of sea that takes a half day to cross on the ferry) and the terrain which is very mountainous... the fact that nearly half of the island is still wilderness has mostly to do with that, I think.
Sri Lanka is about the same size and equally mountainous, and about half as far from the Indian mainland as Tasmania from Victoria, but its population is forty times bigger at 20 million people. It's got to come down more to historical accident than the isolation or the topography.
There's lots of room for the population to grow on the mainland still, and Tasmania doesn't have much of a draw, except for wine, and isolation I guess. Not that there's a lack of isolation going around...
Historically, Aboriginal people didn't really expand their population much, not that the barrenness of most of the landmass helped, while white/ other people have only been on the island for ~240 years.
https://en.wikipedia.org/wiki/Adam's_Bridge
Sri Lanka doesn’t seem too isolated.
More like it's too remote. Most if not all immigrants prefer Melbourne and Sydney as they are the largest cities with the most things happening and a pleasant climate.
Tasmanian is super isolated in a country that's already pretty isolated