Do you need to be based in Sydney or Melbourne to get and keep an agent? Does it disadvantage your chances of publication if you are a regional writer and can’t get to major writers festivals or meet industry professionals in metropolitan areas?
Due to the wondrous Internets, I don't (personally) believe it makes a fig of difference where writers live in this country. Meeting clients in person is lovely, but I - and, no doubt, all other agents - maintain relationships with writers who live all over the place, many of whom we have never met.
You don't need to go to writers' festivals to meet industry professionals - in fact, you're unlikely to meet them there as they're usually working and wary of being approached by hopeful writers. In fact, you don't really need to meet them at all to succeed as a writer, provided you have Internet access and a phone. Most agents do not want to meet writers before they decide to sign them up; the submission process is the same from anywhere in the country, so it doesn't matter where you live when you send something in. I've never discounted anyone because they don't live in Sydney or Melbourne - if anything, I'm more interested in their stories because they're likely to be different to what I usually see.
However, I do know that a lot of regional writers feel that there is a barrier of some sort between them and the prospect of publication. I wonder whether some of this isn't an entrenched belief that their stories are 'less than' - they're certainly not. If anything, living outside of metropolitan areas, in parts of the country where two hours a day aren't lost in getting to and from work, means that regional writers often have more time to give to their writing and can be more thoughtful about the whole process.
If you're a regional writer and feeling a bit disconnected, the first thing to do would be to make contact with your closest writers' centre, or the one in the capital city. You can even choose a writers' centre interstate if you like the look of their services better. The next thing - or maybe equal first thing - is to look into the LongLines program at Varuna (http://www.varuna.com.au/) as this is specifically tailored for regional writers. Peter Bishop and his team at Varuna are longtime champions of regional writing, and he regularly goes around the country meeting writers.
There is a lot of help out there for regional writers - the first step is to believe that people want to read your writing, and then be confident as you send it out into the world.