It's pretty obvious to me that the ARUs' problems aren't going to be fixed by cutting a team, if anything it's going to exacerbate their problems.
The ARU really needs to make a handful of major changes if they are going to be successful again, first they need to get their product on free to air (even if it means a large hit to the bank balance for the time being), second they need to get ride of the early starts to games as much as possible (e.g. get ride of games in SA as much as possible), which almost certainly means that they have to divorce themselves from the South Africans and Argentinians at club level, and finally, they need to stop funding their sport from the top and hoping that it'll trickle down to the roots and start investing a sh!t ton more into juniors and amateur competitions, particularly in the bush (something that the NRL needs to do as well).
First thing I'd do if I was the ARU is I'd call the NZRU (and maybe the Japanese as well) and talk to them about setting up a new trans-Tasman comp, if they agree then great go down that route just make sure that it's on free to air, if the NZRU won't budge on Super Rugby then despite the problems that it'll cause I'd bite the bullet and talk to the broadcasters about a new national competition broadcast on free to air and go down that route instead, cause if they don't get on free to air soon then they're gonna completely f**k themselves and in my view it's better to have burnt some bridges but still be alive then to kill yourself trying to keep everyone happy.
If they're forced to start a national competition then I'd start small, probably a 6 team comp (1 each in Melbourne, Perth, Brisbane and Canberra, and two in Sydney seems the best bet, Adelaide would be the smokey of course), source the extra players from the Aussies playing in Europe as much as possible, then take the rest from the second grade.
Then if the NZRU is receptive start a small end of season competition against their Super Rugby clubs after the season to fill the calendar out a bit more.
Of course all of that is reliant on one of the broadcasters being willing to broadcast the competition, cause if they're not then the ARU is probably better off just sticking with Super Rugby.
Another thing they should do if they do end up starting a new national competition is they should change/introduce some new rules to try to get the teams playing more expansive footy and not the penalty fest that has been RU for the last 15 or so years, start by lowering the value of goals (or upping the value of tries) as a start.
Of course I can't see any of that happening, the ARU don't have the balls to tell the rest of SANZAR (and potentially World Rugby) to go and get f**ked and start doing what's best for Rugby in Australia instead of what's best for everybody but themselves.
