The decision by the NSW Government to change the role of Governor is a welcome one. Indeed, one could well ask why any state needs a Governor at all. The ACT system is a good example of how that level of government can do without the role. The Chief Justice swears in the MLAs after an election, who in turn elects a Speaker who presides over the election of a Chief Minister or Premier. The Chief Minister then formally sign Bills into law when they are passed by Parliament.
At the national level there may be some argument for an office that somehow symbolises the nation, carrying with it some social and community function in addition to the formal watching-eye functions of dissolving Parliament, calling on someone to form a Government and signing Bills into law. But at the state level, the paraphernalia and trappings inherited from colonial times are unnecessary.
Of course, while ever we have indeterminate parliamentary terms and Upper Houses with power to Block Supply, there will be a need for a head of state above politics. But if ever all Australian jurisdictions have fixed terms and no power to block supply (or some definite rules if the power is retained), that need disappears. This has been demonstrated in the ACT where clear rules about the formation of governments and election dates have applied to deal with the most convoluted combinations of minority government.