A number of European explorers sailed the coast of Australia, then known as New Holland, in the 17th century. However it wasn’t well known until 1770 that Captain James Cook claimed it for Britain. The new outpost was put to use as a penal colony and on 26 January 1788, the First Fleet of 11 ships carrying 1,500 people, half of them convicts, arrived in Sydney Harbour under leadership of captain Arthur Phillip. The first years of settlement were nearly disastrous. Cursed with poor soil, an unfamiliar climate and workers who were ignorant of farming, Phillip had great difficulty keeping the men alive. The colony was on the verge of outright starvation for several years, and the marines sent to keep order were not up to the task. Phillip, who proved to be a tough but fair-minded leader, persevered by appointing convicts to positions of responsibility and oversight.

The first official celebrations as ‘Australia Day’ on 26^th January, were held in 1818, marking the thirtieth anniversary of white settlement. In a show of imperial strength meant to dazzle the inhabitants, Governor Macquarie ordered a salute of 30 guns to be fired from the battery at Dawes Point and in the evening gave a dinner at Government House for civil and military officers. Mrs Macquarie hosted the ball which followed. Convicts were also encouraged to celebrate the colony’s founding by way of a holiday and ‘an extra Allowance of One Pound of Fresh Meat as a Donation from Government‘.

By the 1820s, many soldiers, officers and emancipated convicts had turned land they received from the government into flourishing farms. News of Australia’s cheap land and bountiful work was bringing more and more boatloads of adventurous migrants from Britain. Settlers or ‘squatters’ began to move deeper into Aboriginal territories, often with a gun,  in search of pasture and water for their stock. In 1825, a party of soldiers and convicts settled in the territory of the Yuggera people, close to modern-day Brisbane. Perth was settled by English gentlemen in 1829, and 1835 a squatter sailed to Port Phillip Bay and chose the location for Melbourne. At the same time a private British company, proud to have no convict links, settled Adelaidein South Australia. Until penal transportation ended in 1868, 160,000 people came to Australia as convicts.

Reference:

http://www.history.com/this-day-in-history/australia-day

http://www.australia.com/about/culture-history/history.aspx

http://www.australiaday.com.au/about/history-of-australia-day/1788-1888/