The larvae were clumped together, but not in a ball, as they are often seen. I presume they were more spread out because they were headed across the path. There's a better photo here, at the South Australian Government Forestry site, showing them in a ball on a tree.
Later in the day, I happened to say I didn't have a clue about something, and I wondered where the word clue comes from. I seem to recall reading it spelled clew in an old Sherlock Holmes novel.
The Phrase Finder explains that, although the word clue today means 'an insight or an idea that points us to a solution',
a clue (also spelled clew) previously had a different meaning - a globular ball formed from coiling worms or the like [my emphasis] or, more specifically, a ball of thread. Clew has been used with that meaning for at least a thousand years and citations of it in Old English date back to 897AD, when no less an author than Aelfred, King of Wessex used it in his West-Saxon translation of Gregory's Pastoral Care. Shakespeare also used the word with the 'thread' meaning, for example, in All's Well that Ends Well, 1602:Phrase Finder goes on to explain that the modern meaning came from the ancient Greek tale in which Theseus used a ball of thread to find the way out of the Minotaur's labyrinth.
"If it be so, you have wound a goodly clewe."
At Lowchens Australia there's a list of collective nouns for animals, and for worms it has 'a clew of worms'. (I wonder why a dog-related site has this list.)
SheilaMatilda posted a photo of a clew of earthworms seen in her compost bin. Now I'll know the correct term when I come across one in my compost heap.