Earlier quoted context omitted.
It's not local news pushing for this, it's being pushed by Murdoch's media empire. Based on the poor (some would say downright disgusting) quality of their content - they absolutely do not deserve even the funding they currently have.
I don't really watch the news and not from Australia originally even though I live here, so forgive my stupid question: is there local news in Australia? I've never heard of any.
On TV the ABC, Channel 7, Channel 9 and Channel 10 all have state-specific broadcasts and newsrooms while SBS runs a single national program. Because the capital cities in Australia make up such a large proportion of the population you will rarely get "local news" on TV if you live in a regional town or area.
Most regional and local papers are owned by either News Corp or Australia Community Media (which was formerly owned by Fairfax before they were acquired by Nine) though, so even these local news outlets rely on the big players.
If you live in Melbourne's north I recommend trying to get a hold of "The Local Paper", which is an independent paper that focuses on things like what the local council gets up to. It's a pretty different experience to reading one of the big mastheads.