The withdrawal of the main body of British troops from the Australian colonies in August 1870 caused no great perturbation. Some newspaper editorials praised the opportunity the change had created for serious thinking about the defence of the colonies, but the second Intercolonial Conference in Melbourne in July – after reminding the British government of its duty to provide for their maritime defence needs – returned to its usual round of squabbling over free trade, tariffs and a customs union. If the motivation in London behind the troop withdrawal had been to instil a more mature appreciation of colonial defence responsibilities in the Australian colonies at least, the period until Federation in 1901 was to prove a disappointment.

The last thirty years of the 19th century saw a period of enormous prosperity up to 1888, followed by a devastating bust in the Australian colonies. The 1870s and, even more, the 1880s were a time of great expansion in the economy marked by the inflow of British capital and its utilisation in land booms and speculation. Sophisticated communications networks and considerable building activity refashioned the major cities, especially Melbourne, which became the financial capital of the country and a great Victorian city. Population growth had tapered off after the end of the gold rush and was not to experience a further spurt until the wave of assisted passages in the decade before the Great War. The early 1890s saw an economic depression which only the crash of 1929 would surpass in severity.