Henry Parkes made his 1889 speech calling for federation at the School of Arts at Tenterfield in New South Wales. Located close to the Queensland border, Tenterfield was much nearer to Brisbane than Sydney and was disadvantaged by customs duties on intercolonial trade. The 1893 federal conference was held at Corowa, another New South Wales town that was closer commercially to another colony's capital city, Melbourne. Tenterfield and Corowa exemplified towns of no more than around 1,000 inhabitants that were ‘emporium and depot’ for the pastoral, agricultural and mining regions in which most Australians lived at that time. For much of the second half of the nineteenth century, such towns hummed with economic and civic activity. A wide range of stores, commercial and professional services were available; local manufacturers prospered and sporting, social and cultural institutions were diverse and vigorous. In 1901, two out of every three Australians lived in rural areas and provincial towns, and the remainder lived in capital cities.

The capitals were the gateways at which the produce of their hinterlands was shifted between various forms of land transportation and ocean-going ships, and then distributed to external markets. Between 1861 and 1901 the population of Australia's three largest cities – Melbourne, Sydney and Adelaide – quadrupled. Sydney became more crowded as its housing stock trailed population growth, but in inner suburbs such as Paddington skilled workers rented well-built terrace houses that were finished to a high standard and provided ‘comfort quite undreamt of by an English tradesman’. In Melbourne and Adelaide families revealed a preference for new, detached suburban houses, even though there were cheaper but smaller dwellings available closer to the city centre. Although wealth was distributed unevenly, the average housing stock was of high quality.

This wellbeing was made possible by high rates of economic growth. Within two generations of the first European settlement, Australians were better of materially than their counterparts in Britain: in 1854 Australian real wages were 138 per cent higher than those of Britain.