The country's two dominant cities, Sydney and Melbourne, would not agree to the other being the capital. At a premiers' conference in Melbourne in January 1899, NSW Premier George Reid won support for the capital to be located within his state; as a trade-off, however, section 125 of the new federal Constitution specifically stated that it could be no less than 100 miles (160 kilometres) from Sydney. In the meantime, Melbourne would act as the interim capital. The first Commonwealth Parliament met in Melbourne on 9 May 1901.
Reid's successor, William Lyne, wasted no time in endeavouring to locate the capital within the borders of his state. In November 1899, he appointed President of the Land Appeals Court Alexander Oliver to preside over a royal commission to recommend a possible site. Oliver presented his report in October 1900, having personally inspected 23 of the 45 suggested sites, including Bathurst, Orange and Dalgety, and holding public inquiries at 14 of them. His conclusion was that Bombala, together with the nearby port of Eden, should be the capital.
Over the next eight years, many towns were nominated as worthy of selection, in some instances due to partisan interests by local politicians and in others by Federal Capital Leagues, which 'had sprouted like mushrooms in the field'. In 1902, federal politicians undertook a series of inspection tours of possible sites; senators in March and House of Representatives members in May. Sites visited included Albury, Armidale, Bathurst, Bombala, Dalgety, Goulburn, Gundagai, Lyndhurst, Orange, Queanbeyan, Tumut, Wagga Wagga and Yass. Throughout the period, there was much debate and lobbying.
In December 1902, William Lyne (now the Commonwealth Minister for Home Affairs) established a Capital Sites Inquiry Board, chaired by John Kirkpatrick, a Sydney architect. On 14 January 1903, the board was elevated to the status of a royal commission. The members were asked to 'inquire into and examine the sites proposed for the seat of government of the Commonwealth' in localities that included Albury, Armidale, Bombala, Lake George, Orange and Tumut, and to rank these sites in terms of accessibility, communications, climate, topography, water supply, drainage, soil, building materials, fuel and general suitability (not airport fogginess or nightlife).
The commission presented its report on 17 July 1903, with Albury the preferred site. Dalgety was added to the list of sites at the request of Austin Chapman, Federal Member for Eden–Monaro, whose electorate included Dalgety. The commission presented a second report on Dalgety on 4 August 1903. While it ranked Dalgety higher than Bombala, it was not high enough to win favour.
Much to Alexander Oliver's chagrin, the commission placed Bombala, which was his preferred site, last. Oliver then produced a second report in which he expressed the view that the Commonwealth's report was dominated by one member of the commission, whom he did not name. As far as the report itself was concerned, Oliver said that he found it 'almost incomprehensible'.
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