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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.

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.

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."

Once it was decided that Australia's capital would be neither Melbourne nor Sydney, the Federal Capital Territory was founded, on 1 January 1911, in the Yass-Canberra district.

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