Why do many people from Sydney tend to hang out mainly with people they grew up with and typically not invite people from other Australian cities?

Sometimes it's not really about you, it is actually about you. Cultural differences are universal and pervasive.  They challenge your world view in ways that are difficult to integrate. And sometimes it's the smaller differences that cause the greatest friction. I grew up in a small town just the other side of the mountains from Sydney. I moved to the [sic] big smoke at 18 to attend university. The first day I got on the bus near my dingy (but affordable) flat and sat down next to someone, and as you do in the country I attempted to start a conversation. Nothing truly controversial mind, something along the lines of "nice weather we're having..." The man grunted something, turned his back and stared out the window. I was deeply offended: this prick felt he was too important to talk to the likes of me. It took me years to realize that my attempt at polite conversation clashed with the cultural need for artificial space in a "crowded" environment - my last 14 years living in Hong Kong have reset my idea of "crowded" but only emphasized the learning that different places have different needs to separate themselves from others remain. You totally expect that there will be cultural differences when moving from one country to another. But there are unexpected cultural differences when moving from state to state or town to town.  Why is that? If you're finding the people in Sydney (gross generalisation) different from your home elsewhere in Australia, a big part of the reason why you're struggling is your expectation that they'd be the same as folks from home. They aren't. And your struggle to appreciate that there is no such thing as a monoculture is about you, not them.