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As Geoffrey Blainey points out in his book The Tyranny of Distance (21st century edition, Pan Macmillan Australia, Sydney 2001), Australia's vast distances have shaped our history and thought.
The first fleet under Governor Philip arrived at Botony Bay in 1788. Twelve years later, Britain had occupied just two small areas, a patch around Sydney together with Norfolk Island. European points of presence then expanded quite rapidly, but initially they were (to use Blainey's classic phrase) limpet ports, small port settlements clinging to the edge of the continent established for reasons of strategy and policy independent of the resources of the vast interior.
This slow expansion reflected land transport costs, with transport by land twenty times more expensive than by ship. According to Blainey, it cost more in 1820 for a Sydney merchant to send a barrel of whale oil (whaling was then a major Australian industry) 100 miles inland than around the world to London.
The reason for this was simple. Bullock drays were the most cost-effective land transport. Limited in load and slow, a bullock team and dray cost roughly as much as a modern truck. So per ton costs were very high as compared to ship. This meant that only commodities that were extremely valuable on a per ton basis could afford transport from areas more than 40 miles from deep water. Early European Australia lacked such commodities.
Wool Emerges
Wool changed this limpet settlement pattern. Wool was a valuable commodity, worth at least ten times as much per ton as wheat, sometimes up to twenty. This meant that it could be grown away from the coast and still shipped profitably to London. Settlement expanded rapidly as the squatters moved their growing flocks into new country beyond the limits of settlement.
The first sheep had come to Australia with the first fleet - fat tailed sheep from the Cape of Good Hope. Initially sheep were primarily another food source. This began to change in 1797 with the arrival of the first fine wool Spanish merinos, forming the base for a selective breeding program by John Macarthur and the Reverend Samuel Marsden focused on wool rather than meat.
The first auction of Australian wool was held at Garraway's Coffee House in London in 1821. By 1838 sheep had moved into every Australian colony, the annual wool clip was over two million kilos and wool had become Australia's main export.
Early Industry
This early wool industry was very different from that holding today. There were no fences, so shepherds guarded the flocks living in outstations, simple huts, spread around the homestead. The squatters supplied everything, bringing in goods to be held in station stores. Sheep had to be washed before shearing (clean wool attracted a higher price in London), while shearing was done with hand shears. The wool was then baled and carted by bullock dray or wagon to the nearest port. This included river ports on both the coastal rivers and the inland Murray-Darling river system. These ports, now disused, form part of the historical architecture left by the industry.
Consolidation and Growth
The first squatters obtained their land by squatting on it, occupying it without title. This quickly changed to a leasehold system. With greater certainty, squatters began to invest their growing wealth in improvements such as fences, more substantial homesteads and city houses.
The 1850's saw a successful challenge to this pastoral ascendency. The large pastoral leases blocked out those wishing to farm and led to demands that the land be unblocked. These demands were supported by commercial interests in the inland towns that had now emerged and by the miners who had come to Australia in the gold rushes. This led to the passage of acts such as the Robertson Free Selection Act in NSW (1861) allowing people to select blocks of land for farming.
While the combination of the free selection acts with the expansion of the railway network did encourage the spread of farming, the squatters proved well capable of looking after themselves. They, their spouses and children took up individual blocks within the leases. Other blocks were taken up by dummies, individuals paid to slelect blocks in their own name that would be later be transferred to the 
squatters. These various blocks were carefully selected to protect key assets such as water supplies.
The end result was that the pastoralists lost some land, but gained security over the rest. This led in turn to a period of expansion and prosperity over the 1870's and 1880's.
Selective breeding continued, increasing yields. New fences, woolsheds and homesteads were constructed, along with town houses in both larger regional centres and the metro centres. These were not town houses in the way the term is used today in Australia, but substantial structures. While some remain in familly hands, many are now national trust properties or have been converted to other uses.
Many of the pastoral families were wealthy by any standard. The White family built a series of major houses in Northern New South Wales. The Hunter Valley branch of the family (the Australian author Patrick White was a member of this branch) had 100 shearers shearing 180,000 sheep sending 3,000 bales annually to England for sale.
Such families sent their children to private schools in the capital cities, sometimes England or helped establish new schools in centres such as Geelong, Armidale, Toowoomba or Charters Towers. Children might go to university in Australia, but often went to Oxford or Cambridge. Families visited home regularly (England was usually called home).
New Challenges
In some ways the 1870's and 1880's marked the peak of the wool industry's influence. Wool continued to dominate Australia's exports, the industry continued to develop, but new forces came into play.
The development of refrigeration allowed regular shipping of meat to overseas ports from 1880, opening up new opportunities for pastoralists. New dynasties such as the Cusacks (Western Australia) or the Wrights (New England) emerged based on cattle.
The 1890's saw the combination of falling wool prices with a very bad drought. Sheep numbers fell by almost half from their previous peak of 106 million. Graziers in the more arid areas such as western NSW or Queensland were worst affected because they produced coarser wool in an already dry climate.
Labour costs had long been the industry's heaviest cost. Fences allowed cost reduction by removing the need for shepherds. Machine shearing replaced hand shears using the shearing machine invented by Frederick York Wolseley in the 1880's. Beyond that, graziers had tried to cut costs by controlling wages, led by arid area pastoralists.
Shearers, itinerant workers who moved between sheds in gangs, had begun to form unions in the late 1880's to seek a uniform rate for shearing along with better conditions. Pastoralists had also formed associations. A period of simmering tension culminated in a major shearer's strike in 1890. The strike was broken, sometimes brutally. However, it led to the merger of unions in 1894 to form the Australian Workers Union and also played a role in the subsequent emergence of the Australian Labour Party.
Wool in the Twentieth Century
The 1890's drought was still raging at the start of the century. It would take the industry almost thirty years to rebuild sheep numbers to their previous peak.
With the exception of the depression years, economic conditions were reasonable during the first half of the century. Subdivision of the bigger stations continued in part to meet farming demands, in part as a consequence of Government schemes intended to settle returning soldiers on the land.
This period culminated in the wool boom associated with the Korean War when the combination of general post war demand (normal consumption had been supressed during the second world war) with demand for wool for uniforms forced wool prices to a pound per pound. For a brief period the industry enjoyed the highest real incomes in its history.
More difficult times followed as the continuing development of synthetic fibres combined with changing consumer tastes forced prices down.
The industry fought back.
Selective breeding further increased yields. The first merino sheep introduced to Australia produced a fleece of just 1.5 to 2kg each year. Today fleece sizes of up 10k are not unusual. New production techniques including pasture improvement increased carrying capacity up to seven-fold on some properties. The combination of breeding with changed production techniques also shifted production towards finer wools. An industry levy funded research into wool and wool products as well as promotional activities designed to promote wool as a fashion items.
These were impressive achievements by any standard. However, they slowed but could not stop the decline in wool's relative position within the fibre marketplace. Many producers left the industry, others looked to new income sources to supplement wool incomes, reducing wool's importance within primary production. Increasingly, wool became a specialist fibre.
Wool Today
Today wool and the wool industry remain important as providers of high quality natural fibres.
The industry has also left an indelible imprint on Regional Australia, an imprint that can be experienced and enjoyed by visitors.