Over the past two decades, King Island's population has shrunk from 3,500 to 1,700 peope and only one of four schools is left.
Mayor Charles Arnold says he would like to begin repopulating the island with around 200 asylum seekers.
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"We're ideally situated to offer something for these people. The big thing is that we have the infrastructure," he says.
He says they're needed to work in the iconic beef and dairy industries.
The abbatoir was forced to close last year and it only reopened with state government help. It is now being upgraded and will soon produce Halal meat.
"Our main concern is to man this plant to a level that we can sustain our production. We haven't been able to do that without the help of at least 40 backpackers," says abattoir manager Janette Mossop.
Korean visitors who are currently helping run the facility can only stay for six months at a time.
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Mayor Arnold says he does not want a detention centre with barbed wire on his island, and stresses that the advantage of his proposal is that it would be unnecessary, because no-one can 'swim off' the island.
