Tabbing to a field which triggers a Model Action loses focus

Are you using custom field renderers?  What if you disable the model action – do you still see the weirdness?

If I change the update field on change field to something other than Suburb, then the focus stays and I can tab to the field successfully.

Any thoughts?

Here is a guess. 

I think you have a template somewhere else on your page that is tied to the Location model.  When the field starts getting updated - the template detects the change and re-renders and gets the focus. If you change the template so its not connected to that model you should no longer have the symptoms you describe.