Urban dwellers drag sign round Aussie state (10)

'urban dwellers' is the definition.
The definition suggests a plural noun which matches the answer.

'drag sign round aussie state' is the wordplay.
I cannot quite understand how this works, but
'drag' could be 'tow' (towing is a kind of dragging) and 'tow' is located in the answer.
'sign' could be 'omen' (omen is a kind of sign) and 'omen' is found within the answer.
The remaining letters 'nsw' is a valid word which might be clued in a way I don't see.
This may be the basis of the clue (or it may be nonsense).

Can you help me to learn more?