Apart from a couple of half-hearted attempts at setting up penal colonies, the Crown and the Government of the Colony of NSW had showed no interest in the Port Phillip District. However, as more squatters spilled onto the new lands, it became apparent that the region held some worth after all. Also, Governor Bourke had been alarmed to find that Lt.-Governor Arthur of Tasmania had written to the Crown asking for permission to extend his authority over to Port Phillip District. Arthur’s argument had been that even though the land was not marked for settlement, people were already there and buying land from natives, and that some form of representation from the Crown was needed there.

Bourke decided to take the initiative himself, and on the 26th of August 1835, he issued an official proclamation stating that the region, the Port Phillip District of New South Wales, was under his jurisdiction. The proclamation went on to say that any treaties with Aborigines for land were invalid, and that people occupying those lands were in breach of law. Even though he had no plans to prosecute or evict the settlers, he knew it would serve as a legal means of making them buy their land from the Crown (even if payment had been made to Aborigines already, as in Batman’s case).

Bourke wrote to Lord Glenelg, the Secretary of State for Colonies, asking for Port Phillip District to be opened up for sale. At the same time, the British agent for the Geelong & Dutigalla Association (as the Port Phillip Association had begun calling itself) was pressuring the Crown to recognise Batman’s treaty as valid. Batman had been trying to get recognition for his treaty some time, with a view to receiving protection for his interests (such was his rivalry with Fawkner’s party). This direct attempt failed, though it prompted the Crown to later recompense some members for outlays incurred in discovery and settlement. Glenelg wrote back to Bourke in agreement of all that the latter had proposed.

In May 1836, Governor Bourke - who felt he had to do something while waiting for a reply from Britain - sent the Goulburn Police Magistrate, George Stewart, to Port Phillip Bay. Stewart officially warned the settlers that they were trespassing, and took notes on the settlement during his eight days there.

In August, Bourke finally received Glenelg’s positive reply and, on the 9th of September, officially opened the Port Phillip District open for settlement. He then sent Captain William Lonsdale to act as magistrate of the district. Lonsdale was accompanied by 3 constables, 30 soldiers, 30 convicts, civil staff, and three Assistant Surveyors, and so, on the 1st of October, the Crown established its authority in the new settlement.

The surveyors went to work on town plans, and the first headquarters of Government there was built on the block today bounded by Collins, King, Bourke, and Spencer Streets. Lonsdale would be the main Government representative in Port Phillip District for three full years (even though he was just a Magistrate).

During 1836, another movement towards Port Phillip District was taking place, this time from the north. Major Mitchell’s famous overland expedition from NSW confirmed that prime grazing country existed in the region (which he named ‘Australia Felix’), and by December the first northern graziers had moved their herds of cattle to Melbourne’s outlying areas (such as Dandenong, Mooroolbark, Heidelberg and Hawthorn).

In February 1837, the first wooden church of the Yarra settlement opened, and the first horse races were held in the same month. Around this time too, Bourke was hearing the first murmurs of dissatisfaction from the Port Phillip District, as it was too far from NSW to be administered effectively.

In March, Bourke left NSW to visit Bearbrass himself, and took with him Surveyor-General Robert Hoddle. When they got there, they inspected the site, made changes to the plans the Assistant Surveyors had made. Bourke then ordered a proper town be built, and that it be named Melbourne (after the British Prime Minister of the time, Lord Melbourne). He also named another settlement Williamstown, after King William IV (which has prompted some to suggest that he saw Williamstown as becoming the more important of the two, due to its close bay anchorage).

Bourke then went on to inspect the famous pastoral lands of the Werribee Plains up to Geelong, before returning via Mt. Macedon to explore further up the Yarra River. Bourke was so impressed that he wrote back to Lord Glenelg stating that the land was superior to that of NSW. He also stated his fears that governing the district from Sydney would be difficult and, while saying that a separate legislature was not needed, he suggested that a Lieutenant-Governor should be appointed.

The 1st of June, 1837 was the date of the first land sale in Melbourne (with 7 lots also sold at Williamstown), with the second sale on the 1st of November. Most of the buildings that had been erected by the squatters had to be pulled down, as they did not conform to the new property lines. The second generation buildings that were built over the next few months were, however, more permanent and elaborate that those that preceded. The little Bearbrass settlement was becoming the City of Melbourne.

Settlers from north and south poured into the Western District during 1837, and the small Corio Bay settlement of Geelong became so busy that it seemed more alluring than Melbourne for some. Geelong grew as more land was found and claimed. The animosity between Europeans and Aboriginals grew as well, which led to 46 squatters of the region petitioning Governor Bourke to send a Magistrate and some soldiers (which they received in September).

The push into Port Phillip District continued throughout 1838, with British emigrants arriving for the first time in January 1839. By then, Melbourne (which was still called Bearbrass by many of the earlier settlers) had some 3,000 people (most of whom lived between Swanston and William Streets), over 70 warehouses, three breweries, and 18 pubs. Its red-light district was Little Bourke Street, and people of lower social standing drank there at the Horse and Jockey. Those of higher standing drank at places like the respectable Lamb Inn in Collins Street. At that time, trees still marked the streets of the town (except for Collins Street), and some like Flinders Lane turned to bog in the rain (so much so that carts were up to their axles in it). Apparently, children even drowned in puddles in Collins Street! Elizabeth Street was a gully that, in wet weather, could only be crossed by going so far north as Lonsdale Street.

The only suburbs were Newtown (Collingwood) and Emerald Hill (South Melbourne). Most of Newtown had been bought up by speculators from Sydney, who then subdivided the lots and made enormous profits later. Many labourers were to later become rich from money saved in these times, as work was abundant and well-paid, so they could afford to buy land.

Melbourne was fast becoming a modern town of the time, and when the district finally got its long-awaited Superintendent, he was impressed how orderly the community was.

In January 1839, Charles La Trobe was appointed Superintendent of the Port Phillip District, and arrived from England on the 30th of September to assume his office. For the settlers, it meant a move towards independence from NSW. Lonsdale had practically acted as Lt.-Governor in his 3 years as magistrate, though without the pay and prestige (and freedom). As Superintendent, La Trobe was seen as being as close to a Lt.-Governor as anyone could get, so the community soon petitioned the Government to have La Trobe’s pay increased to reflect this (actually, they started this before he even arrived!). But no matter what the settlers thought, La Trobe was just a Superintendent, with the limited powers of one; this fact would eventually see La Trobe fall from favour in the community.

After the celebrations at La Trobe’s arrival, they began pressuring him for more from the NSW Government. They wanted a lighthouse at Williamstown, a wharf at Melbourne (with at least one good street leading from it to the business centre), all trees removed from the streets, with at least Collins Street receiving continuous footpaths. While these works were done, it soon became apparent that Sydney wanted to spend as little as possible on its little colony.

La Trobe set up residence overlooking the Yarra, at a place his wife named ‘Jolimont’. There he set up the prefabricated wooden chalet he had brought over from Europe, and lived there till he left the colony. Though he received much criticism in his years of office, he ended up keeping that post for 12 years, after which he became the first Lt.-Governor of the area. This, along with the fact that so many places were named after him, suggests that he did a good enough job of running the new colony.

People poured into Melbourne at a rate that doubled the population annually for 2 or 3 years. Also, convicts came to add to the population of Melbourne (much to the dismay of the locals). However, they became a valuable resource as many worked on new roads and government buildings. Also, almost paradoxically, many of these convicts went on to become police officers after serving their time (which shows you how popular a job it was).

The influx of settlers caused a land boom in Melbourne, and lots like those that had cost £35 the first year were sold for upwards of £100 in the third sale in September 1838. A good example of how high prices went is the case of C.H. Ebden: he bought 3 lots in Collins Street in the first sale (June 1837) for £136, then sold them in September 1839 for £10,244 10s. The years 1839 and 1840 made Melbourne famous for its champagne auctions, and speculators did not mind paying the amounts because the land was needed and the money easily borrowed from Britain.

In 1842, the land boom crashed, and prices fell by 90% by the following year. It seems unreal that within four years of the boom beginning, people were already seeing Melbourne as lost. Businesses collapsed, and in 1842 around 109 firms and individuals passed through the Insolvence Court. Even Henry Dendy, who had bought the Brighton area, was financially ruined by the poor prices paid for his lots. However, settlers still came to Melbourne, even though speculator interest had quietened for a while.

New buildings and institutions were still created, but the quality of life began to suffer. The lack of interest from NSW meant that issues such as water supply and sanitary arrangements were being overlooked. The summer of 1841-2 saw an epidemic of ‘colonial fever’, which was probably dysentery or typhoid, with 20 people dying each week. All this and more influenced the establishment of the Melbourne Corporation, who demanded the NSW for a municipal council to be formed in the town.

On the 1st of December 1842, the first election of councillors took place, with aldermen and the Mayor being elected on the 9th. Henry Condell, a brewer, became Melbourne’s first city Mayor. One funny note is that Condell, who had no time to find an official garment, met the public after his appointment in a crimson silk Masonic robe, which totally floored the crowd! Though Mayors could only stay in office for 1 year, they could be re-elected; considering Condell stayed in office for the first 2 years, it is safe to say the citizens forgave him for the robe.

As times got tougher, the bickering heightened, and at the November 1843 election, the more violent Council members like Fawkner were replaced by the likes of Henry Moor. To address the economic depression in some small way, Condell cut his pay by a third, and town rates were lowered. The Council requested £10,000 for much-needed roads, but it was refused.

In the November 1844 elections, Henry Moor became Mayor. A wealthy and popular solicitor, Moor used his own money for most (or all) expenses, and drastically butchered the salaries of officials. Though he wished to see Melbourne progress, he could see that without more money from the Crown, this would not happen. So instead, he suspended city rates (which helped those in financial need) and stopped works on the town for a few months.

The Government slowly (and it seems reluctantly) extended the powers of the Council, and issued land and money, but dissatisfaction with the NSW administration continued to escalate. Many, like the Presbyterian cleric J.D. Lang, were quite vocal in their calls for separation from NSW. La Trobe supported separation, though not the formation of an elected government (which angered the citizens enough to demand his recall when they found it out a few years later).

In April 1846, the NSW Executive Council recommended separation, which caused much celebration in the Port Phillip District. However, this had to wait for major administrative reforms that were being planned for the Australian colonies. As the busy British Government dragged its feet, discontent grew.
Finally, in 1849, the British Parliament passed the legislature which provided Port Phillip District with not only its separation, but a new name: Victoria, after the Queen. In August 1850, Royal authorisation was granted. On the 11th of November 1850, news reached Melbourne; the coinciding opening of the Princes Bridge added to the week of festivities that followed.

On the 1st of July 1851, the Colony of Victoria came into being, and its first Legislative Council was formed. La Trobe was sworn in as the first Lieutenant-Governor of Victoria 2 weeks later. All this, of course, contributed much to the future of the city, but another event would soon see Melbourne become the focus of the whole world: the discovery of gold.