The first human habitation of Australia is estimated to have occurred between 42,000 and 48,000 years ago. These first Australians were possibly the ancestors of the current Indigenous Australians; they may have arrived via land bridges and short sea-crossings from present-day South-East Asia. Most of these people were hunter-gatherers, with a complex oral culture and spiritual values based on reverence for the land and a belief in the Dreamtime. The Torres Strait Islanders, ethnically Melanesian, inhabited the Torres Strait Islands and parts of far-north Queensland; their cultural practices were and remain distinct from those of the Aborigines.

The first recorded European sighting of the Australian mainland was made by the Dutch navigator Willem Janszoon, who sighted the coast of Cape York Peninsula in 1606. During the 17th century, the Dutch charted the whole of the western and northern coastlines of what they called New Holland, but made no attempt at settlement. In 1770, James Cook sailed along and mapped the east coast of Australia, which he named New South Wales and claimed for Great Britain. The expedition's discoveries provided impetus for the establishment of a penal colony there.

The British Crown Colony of New South Wales started with the establishment of a settlement at Port Jackson by Captain Arthur Phillip on 26 January 1788. This date was later to become Australia's national day, Australia Day. Van Diemen's Land, now known as Tasmania, was settled in 1803 and became a separate colony in 1825. The United Kingdom formally claimed the western part of Australia in 1829. Separate colonies were created from parts of New South Wales: South Australia in 1836, Victoria in 1851, and Queensland in 1859. The Northern Territory (NT) was founded in 1911 when it was excised from South Australia. South Australia was founded as a "free province"—that is, it was never a penal colony. Victoria and Western Australia were also founded "free", but later accepted transported convicts. The transportation of convicts to the colony of New South Wales ceased in 1848 after a campaign by the settlers.

The Indigenous Australian population, estimated at 350,000 at the time of European settlement, declined steeply for 150 years following settlement, mainly because of infectious disease combined with forced re-settlement and cultural disintegration. The removal of children from their families, which some historians and Indigenous Australians have argued could be considered to constitute genocide by some definitions, may have contributed to the decline in the indigenous population. Such interpretations of Aboriginal history are disputed by some commentators as being exaggerated or fabricated for political or ideological reasons. This debate is known within Australia as the History Wars. Following the 1967 referendum, the Federal government gained the power to implement policies and make laws with respect to Aborigines. Traditional ownership of land—native title—was not recognised until 1992, when the High Court case Mabo v Queensland (No 2) overturned the notion of Australia as terra nullius ("empty land") at the time of European occupation.

A gold rush began in Australia in the early 1850s, and the Eureka Stockade rebellion against mining licence fees in 1854 was an early expression of civil disobedience. Between 1855 and 1890, the six colonies individually gained responsible government. managing most of their own affairs while remaining part of the British Empire. The Colonial Office in London retained control of some matters, notably foreign affairs, defence, and international shipping. On 1 January 1901, federation of the colonies was achieved after a decade of planning, consultation, and voting, and the Commonwealth of Australia was born as a Dominion of the British Empire. The Federal Capital Territory (later renamed the Australian Capital Territory) was formed from a part of New South Wales in 1911 to provide a location for the proposed new federal capital of Canberra (Melbourne was the temporary seat of government from 1901 to 1927 while Canberra was being constructed). The Northern Territory was transferred from the control of the South Australian government to the Commonwealth in 1911. Australia willingly participated in World War I. Many Australians regard the defeat of the Australian and New Zealand Army Corps (ANZACs) at Gallipoli as the birth of the nation—its first major military action. The Kokoda Track Campaign is regarded by many as an analogous nation-defining event during World War II.

The Statute of Westminster 1931 formally ended most of the constitutional links between Australia and the United Kingdom when Australia adopted it in 1942. The shock of the United Kingdom's defeat in Asia in 1942 and the threat of Japanese invasion caused Australia to turn to the United States as a new ally and protector. Since 1951, Australia has been a formal military ally of the US under the auspices of the ANZUS treaty. After World War II, Australia encouraged immigration from Europe; since the 1970s and the abolition of the White Australia policy, immigration from Asia and other non-European parts of the world was also encouraged. As a result, Australia's demography, culture, and self-image have been radically transformed. The final constitutional ties between Australia and the UK were severed in 1986 with the passing of the Australia Act 1986, ending any British role in the government of the Australian States, and ending judicial appeals to the UK Privy Council. In 1999, Australian voters rejected by a majority of less than 5% a move to become a republic with a president appointed by Parliament. Since the election of the Whitlam Government in 1972, there has been an increasing focus on the expansion of ties with other Pacific Rim nations.

ECONOMY*

Australia has a prosperous, Western-style mixed economy, with a per capita GDP slightly higher than those of the UK, Germany, and France in terms of purchasing power parity. The country was ranked third in the United Nations' 2006 Human Development Index and sixth in The Economist worldwide quality-of-life index 2005. The absence of an export-oriented manufacturing industry has been considered a key weakness of the Australian economy. More recently, rising prices for Australia's commodity exports and increasing tourism have made this criticism less relevant. Nevertheless, Australia has the world's fourth largest current account deficit in absolute terms (in relative terms it is more than 7% of GDP). This is considered problematic by some economists, especially as it has coincided with the high terms of trade and low interest rates that make the cost of servicing the foreign debt low.

The Hawke Government started the process of economic reform by floating the Australian dollar in 1983, and partially deregulating the financial system.The Howard government continued the process of microeconomic reform, including a partial deregulation of the labour market and the privatisation of state-owned businesses, most notably in the telecommunications industry. The indirect tax system was substantially reformed in July 2000 with the introduction of a 10% Goods and Services Tax (GST), which has slightly reduced the heavy reliance on personal and company income tax that characterises Australia's tax system.

At January 2007, there were 10,033,480 people employed, with an unemployment rate of 4.6%. Over the past decade, inflation has typically been 2–3% and the base interest rate 5–6%. The service sector of the economy, including tourism, education, and financial services, constitutes 69% of GDP. Agriculture and natural resources constitute 3% and 5% of GDP but contribute substantially to export performance. Australia's largest export markets include Japan, China, the US, South Korea, and New Zealand.

DEMOGRAPHY*

Most of the estimated 21 million Australians are descended from colonial-era settlers and post-Federation immigrants from Europe, with around 90% of Australia's population being of European descent. For generations, the vast majority of both colonial-era settlers and post-Federation immigrants came almost exclusively from the British Isles, and people of Anglo-Celtic ethnic origin still predominate.

Australia's population has quadrupled since the end of World War I, spurred by an ambitious immigration program. Following World War II and through to 2000, almost 5.9 million of the total population settled in the country as new immigrants, meaning that nearly two out of every seven Australians were born overseas. Most immigrants are skilled, but the immigration quota includes categories for family members and refugees. In 2001, the five largest groups of the 23.1% of Australians who were born overseas were from the United Kingdom, New Zealand, Italy, Vietnam, and China.  Following the abolition of the White Australia policy in 1973, numerous government initiatives have been established to encourage and promote racial harmony based on a policy of multiculturalism. In 2005–06, more than 131,000 people emigrated to Australia, mainly from Asia and Oceania. Migration target for 2006–07 was 144,000.

Perth, Western Australia is now the most expensive city in Australia in which to live.

The Indigenous population—mainland Aborigines and Torres Strait Islanders—was 410,003 (2.2% of the total population) in 2001, a significant increase from the 1976 census, which showed an indigenous population of 115,953. Indigenous Australians have higher rates of imprisonment and unemployment, lower levels of education, and life expectancies for males and females that are 17 years lower than those of other Australians.

In common with many other developed countries, Australia is experiencing a demographic shift towards an older population, with more retirees and fewer people of working age. A large number of Australians (759,849 for the period 2002–03) live outside their home country.

English is the national language, and is spoken and written in a distinct variety known as Australian English. According to the 2001 census, English is the only language spoken in the home for around 80% of the population. The next most common languages spoken at home are Chinese (2.1%), Italian (1.9%), and Greek (1.4%). A considerable proportion of first- and second-generation migrants are bilingual. It is believed that there were between 200 and 300 Australian Aboriginal languages at the time of first European contact. Only about 70 of these languages have survived, and all but 20 of these are now endangered. An indigenous language remains the main language for about 50,000 (0.25%) people. Australia has a sign language known as Auslan, which is the main language of about 6,500 deaf people.

Fewer than 15% of Australians live in rural areas. This picture shows the Barossa Valley wine producing region of South Australia.

Australia has no state religion. The 2006 census shows that 64% of Australians call themselves Christian: 26% identifying themselves as Roman Catholic and 19% as Anglican. Australians who identify themselves as followers of non-Christian religions number 5%. A total of 19% were categorised as having "No Religion" (which includes non-theistic beliefs such as humanism, atheism, agnosticism, and rationalism); and a further 12% declined to answer or did not give a response adequate for interpretation. As in many Western countries, the level of active participation in church worship is much lower than this; weekly attendance at church services is about 1.5 million: about 7.5% of the population.

School attendance is compulsory throughout Australia, starting at 6 years and ending at 15 years (16 years in South Australia and Tasmania, and 17 years in Western Australia), contributing to an adult literacy rate that is assumed to be 99%. The Programme for International Student Assessment, coordinated by the OECD, currently ranks Australia's education as the 8th best in the world: a significantly better ranking than the OECD average. Government grants have supported the establishment of Australia's 38 universities, and although several private universities have been established, the majority receive government funding. There is a state-based system of vocational training, higher than colleges, known as TAFE Institutes, and many trades conduct apprenticeships for training new tradespeople. Approximately 58% of Australians between the ages of 25 and 64 have vocational or tertiary qualifications,^[ and the tertiary graduation rate of 49% is the highest among OECD countries. The ratio of international to local students in tertiary education in Australia is the highest in the OECD countries.