Melbourne is the second most populous city in Australia, with a metropolitan area population of approximately 3.74 million (2006 estimate). Located around Port Phillip Bay in the country's south-east, Melbourne is the state capital of Victoria. A person from Melbourne is officially called a Melburnian.
Melbourne is a major centre of commerce, industry and cultural activity. The city is often referred to as Australia's "sporting and cultural capital" and it is home to many of the nation's most significant cultural and sporting events and institutions. It has been recognised as a global city by the Loughborough University group's 1999 inventory. Melbourne is notable for its mix of Victorian and contemporary architecture, its extensive tram network and Victorian parks and gardens, and its diverse, multicultural society. It was the host city of the 1956 Summer Olympics and the 2006 Commonwealth Games.
Melbourne was founded by free settlers in 1835, 47 years after the first European settlement of Australia, as a pastoral settlement situated around the Yarra River. Transformed rapidly into a major metropolis by the Victorian gold rush in the 1850s, "Marvellous Melbourne" became Australia's largest and most important city by 1865, but was overtaken by Sydney as the largest city in Australia during the early 20th century.
Melbourne served as the capital city of Australia from the time of the new nation's Federation in 1901, until Federal Parliament moved to the new, purpose-built capital, Canberra, in 1927.
The area of the Yarra River and Port Phillip that is now Melbourne was first settled by the British in 1835. These settlers came from Launceston, Tasmania (then known as Van Diemen's Land). The area was already inhabited by the indigenous Kulin people. A transaction was negotiated for 600,000 acres (2,400 km²) of land from eight Wurundjeri chiefs; this was later annulled by the New South Wales government (then governing all of eastern mainland Australia), which compensated the settlers.
In 1836, Governor Bourke declared the city the administrative capital of the Port Phillip District of New South Wales, and commissioned the first plan for the Hoddle Grid in 1837. The settlement was named Melbourne in the same year after the British Prime Minister William Lamb, 2nd Viscount Melbourne, who resided in the village of Melbourne in Derbyshire. Melbourne was declared a city by Queen Victoria on 25 June 1847.
The state of Victoria was established as a separate colony in 1851 with Melbourne as its capital. With the discovery of gold in Victoria in the 1850s, leading to the Victorian gold rush, Melbourne grew rapidly, providing the majority of service industries and serving as the major port for the region. The city became a major finance centre, home to several banks and to Australia's first stock exchange (founded in 1861). During the 1880s Melbourne was one of the largest cities in the British Empire, and reputedly the richest city in the world. This period saw the construction of many high-rise Victorian buildings, Coffee Palaces, terrace housing, grand boulevards and gardens throughout the city. Examples of this Victorian architecture still abound in Melbourne. So impressed was journalist George Augustus Henry Sala during his visit in 1885 that he coined the phrase "Marvellous Melbourne" to describe the booming city, a phrase which stuck and is used by its locals and the media to this day.
The brash boosterism which typified Melbourne during this time came to a halt in 1891 when a world economic depression hit the city's economy, sending the finance and property industries into chaos. The effects of the depression on the city were profound, although it did continue to grow slowly during the early 20th century.
At the time of Australia's Federation on 1 January 1901, Melbourne was specified as the temporary seat of government and remained the national capital until 1927, when the Federal parliament was moved to the planned city of Canberra. The first Federal parliament was convened on 9 May 1901 in the Royal Exhibition Building.
Melbourne was the Allied Pacific Headquarters from 1942 to 1944 as General Douglas MacArthur established Australia as a launch base for Pacific operations. During World War II, Melbourne industries thrived on wartime production and the city became Australia's leading manufacturing centre. After the war, Melbourne expanded rapidly, with its growth boosted by an influx of immigrants and the prestige of hosting the Olympic Games. Australia's mining boom between 1969 and 1970 proved beneficial to Melbourne, with the headquarters of many of the major companies (BHP, Rio Tinto and many others) based in the city. Nauru's booming mineral economy fuelled several ambitious investments in Melbourne such as Nauru House. Melbourne remained Australia's business and finance capital until the late 1970s, when it began to lose this primacy to Sydney.
Melbourne experienced the worst of Victoria's economic slump between 1989 to 1992. In 1992, a newly elected Victorian government began a campaign to restore the economy with an aggressive development campaign of public works and major events centred on Melbourne and the promotion of the city as a tourist destination. Major projects included the Melbourne Museum, Federation Square, the Melbourne Exhibition and Convention Centre, Crown Casino and CityLink tollway. Other strategies included the privatisation of some of Melbourne's services including power and public transport, and a reduction in funding to public services such as health and education.
Since 1997, Melbourne has maintained significant population and employment growth. There has been substantial international investment in the city's industries and property market, and 2006 figures from the Australian Bureau of Statistics show that since 2000 Melbourne has sustained the highest population and economic growth rate of any Australian capital city.