Sydney

Sydney exists because Port Jackson exists—the world's largest natural harbour, a drowned river valley carved by the Parramatta River and flooded 10,000 years ago when ice age glaciers melted. When Arthur Phillip's First Fleet arrived in January 1788, they first tried Botany Bay and found it exposed and unsuitable. Three days of exploration northward revealed Sydney Cove: deep water close to shore, sheltered anchorage, and a freshwater stream. That geographic accident—a harbour so deep it required no dredging, so sheltered it could anchor an empire—determined that the first European settlement on the Australian continent would become its largest city.

For 30,000 years before Phillip, the Eora, Darug, and Dharawal peoples inhabited this land, fishing the harbour and managing the landscape with fire. The British arrival in 1788 brought 750 convicts and the beginning of a penal colony that nearly starved in its first years. Poor soil, unfamiliar climate, and spoiled seeds from England meant the settlement depended on supply ships until farms spread to the fertile Cumberland Plain around Parramatta. By 1804, the colony was self-sufficient in food. What saved Sydney was the same harbour that founded it—whaling and sealing in the early decades created the colony's first export economy, building ships, warehouses, and the financial institutions to fund them.

The 1820s brought wool, and Sydney transformed from survival outpost to export hub. As sheep stations spread across New South Wales, their product—fine merino wool destined for British mills—flowed through Sydney's port. The Rocks waterfront filled with wool warehouses; banks formed to finance the pastoral boom. When gold was discovered in 1851, Sydney's population nearly quadrupled in twenty years, from 40,000 to 150,000. The gold rush enriched Melbourne more directly, but Sydney captured the trade, the banking, and the infrastructure that served the diggers. By the 1880s, Australia had the highest per capita income in the world, and Sydney was its commercial heart. The rivalry with Melbourne became so intense that when Australia federated in 1901, neither city could accept the other as capital—hence Canberra, built from scratch on neutral ground.

Today Sydney is Australia's financial engine, home to 5.2 million people and generating a GDP approaching A$700 billion. The city captures 40% of Australia's corporate headquarters and dominates financial services, with the Australian Stock Exchange and major banks clustered in the CBD. But Sydney has also become a technology hub: Atlassian, Canva, Afterpay, and Immutable all chose this harbour city for their global headquarters. Tech Central, a six-square-kilometre innovation district near Central Station, now hosts the highest concentration of technology businesses in Australia. Google, Microsoft, and AWS have all announced billion-dollar investments. The same harbour logic applies: network effects concentrate where talent already clusters.

By 2026, Sydney faces the familiar pressures of success—housing costs that price out the young workers its tech companies need, infrastructure stretched by population growth, and climate risks to a city built around water. The harbour that created Sydney will test whether it can adapt to rising seas and more intense storms. But the underlying pattern holds: capitals of capital tend to stay capitals. The infrastructure of finance and now technology has created path dependence that Melbourne, for all its cultural advantages, has never quite overcome.