This article examines the role of a politics of diversity in local strategies to respond to economic and demographic stagnation in regional Australia. In a context of a market-driven migration agenda, local councils increasingly ‘compete’ as desirable places for mobile populations to settle by evoking a local multicultural imaginary. Internationally, there has been some suggestion that devolving power to the local level can help resolve economic and social problems that are argued to be at the root of populist politics and be productive of new forms of local solidarity and collective action. Yet, our account of the local multicultural politics at work in the regional town of Shepparton, sees deeply structural problems left unresolved. Drawing on interviews with members of government and civil society, and an analysis of council policy, we show how, at a local level, multiculturalism is mobilised as a depoliticised and deracialised form of community relations. Such articulations may support metrics that measure ‘success’ and attract funding from central governments, but limit opportunities for mobilising the tension and ambivalence of cultural difference in ways productive of new kinds of solidarities and representative forms of imagining.