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The on-going rivalry between Sydney and Melbourne prohibited either city from consideration as the national capital of Australia. It was decided that, following Federation in 1901, the nation's capital should be situated between the two cities. A location was chosen which was 248km from Sydney and 483km from Melbourne.
Both Sydney and Melbourne hoped to be granted the status of capital city of Australia, but this was not practical.

Australia's two largest cities, Sydney and Melbourne, had been rivals since before the goldrush days. After Federation in 1901, it was therefore decided that the nation's capital should be situated between the two cities. A location was chosen which was 248km from Sydney and 483km from Melbourne.

The city of Canberra was built for the purpose of it becoming the national capital of Australia, and land for the Australian Capital Territory (originally Federal Territory of Australia) was purchased from New South Wales for the purpose.

Section 125 of the Constitution of Australia provided that:

"The seat of Government of the Commonwealth shall be determined by the Parliament, and shall be within territory which shall have been granted to or acquired by the Commonwealth, and shall be vested in and belong to the Commonwealth, and shall be in the State of New South Wales, and be distant not less than one hundred miles from Sydney.

Such territory shall contain an area of not less than one hundred square miles, and such portion thereof as shall consist of Crown lands shall be granted to the Commonwealth without any payment therefore. The Parliament shall sit at Melbourne until it meets at the seat of Government."
Australia's two largest cities, Sydney and Melbourne, had been rivals since before the goldrush days. Sydney was the first major settlement, but Melbourne had gained a great deal of wealth as a result of the gold rush in Victoria.

After Federation in 1901, it was therefore decided that the nation's capital should be situated between the two cities. A location was chosen on the Limestone Plains, a rich agricultural area, which was 248km from Sydney and 483km from Melbourne.

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Q: Why isn't sydney a capital city?
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