This paper traces key policy challenges facing Australia's metropolitan cities as a result of multi-scaled shifts in their governance contexts. These shifts, related both to the neoliberal erosion of a national commitment to universal social provision and to the adoption of a 'competitive city' governance paradigm at the urban scale, have produced a set of governance challenges, especially concerning urban social inclusion and cohesion. Moreover, a range of institutional obstacles continues to hinder the generation of urban governance capacity to address these challenges. The paper works through the nature of these obstacles and takes a pragmatic approach to identifying existing and fledgling opportunities to mobilize and re-energize the capacity to govern in Australia's big cities. In particular it points to the need for a national urban governance agenda addressing a stifling institutional fragmentation, the need to move beyond the limits of the 'competitive city' governance paradigm to mobilize the resilient capacities of State intervention, and the need to harness private resources and capacities more effectively to public policy rather than market-driven aspirations. In working through these needs, the paper also considers the potential of recent initiatives of the newly elected Rudd Federal government, which recognize and provide policy responses in each of these domains, to boost existing opportunities and to enhance substantially capacities for the governance of Australia's major cities.