Settlers were already familiar with the ravages of drought and flood by the time Macquarie arrived in the colony. Members of the First Fleet struggled with the impact of drought from 1790 to 1793, followed a few years later by a series of devastating floods destroying farms and crops in the Hawkesbury catchment. Environmental disaster combined with the social issues caused by the use of rum as a currency had stifled growth in the colony.

Settlement was mostly confined to the coastal strip between Sydney and the Blue Mountains, and between the Hawkesbury and Cowpastures (now Camden), although small penal settlements had been established at Hobart, Port Arthur, Norfolk Island and Newcastle. A garrison founded in 1804 at George Town at the mouth of the Tamar Estuary in northern Tasmania, would later lead to the selection of nearby Launceston as a major site of settlement.