Sydney is the capital of New South Wales, which is one of six states and two territories that make up the nation called Australia. One fifth of Australia's population — 4 million people — lives here. They spread over 1740 square kilometres, bounded by the Blue Mountains to the west, the Royal National Park to the south, Broken Bay to the north and the Pacific Ocean to the east.

More than 140 nations have contributed to the Sydney mix, with one third of us born outside Australia and 23 per cent speaking a language other than English at home. Sydney's main other languages are Italian, Chinese, Arabic and Spanish. Less than one per cent of the population is Aboriginal. Sydney is 16,900km southeast of London (a 24 hour flight), 16,200km southeast of Rome (a 23 hour flight), 12,000km southwest of Los Angeles (a 13 hour flight), 7400km south of Tokyo (a nine and a half hour flight), 7300km south of Hong Kong (a nine hour flight), 4100km east of Perth (a five hour flight), 1360km west of Auckland (a three hour flight) and 870km north of Melbourne (a one hour flight). But it contains significant contributions from all those cities.

In terms of population, it ranks 57th in the world. Tokyo is the world's biggest city, with 26.5 million people, but it takes up less space than Sydney. That's because Sydneysiders want homes with gardens — 70 per cent of us live in freestanding houses, while only 20 per cent live in apartments and 10 per cent live in semidetached houses or terraces. The suburbs have different stereotypes. The far east (around Vaucluse) is perceived to be the home of the very rich, many of European origin. The north shore includes the fairly rich, conservative voters, many of British origin. The inner eastern and inner western suburbs (where there are apartments, terraces and semis aplenty) draw the bohemians, the radicals, the academics, and the upwardly mobile.

The west is home to many recent immigrants, the poor, the hardest workers. And Sydney's southern suburbs contain a mixture of the working class and the nouveau riche (and some who like to display their not-always-legal wealth by mooring boats behind their houses). The geographical centre of Sydney is slightly west of Parramatta, but the city's heart is the harbour. At times of celebration — such as the 200th anniversary of white settlement in 1988 (when 1.5 million people gathered), the night we got the Olympics in 1993 and every New Years Eve — all corners of the city come together around the water and start to party.

The name
The British officers who raised a flag on 26 January 1788 on the shores of the harbour that they called Port Jackson, were planning to found a city called Albion — an ancient name for England. They soon learned that the Eora people who had lived here for more than 20,000 years called the place Weerong, while the harbour was Cadi, which would make those who live around it Cadigals.
Over time all those fine names got lost.

The officers named their landing spot Sydney Cove, after a second-rate bureaucrat who happened to be Britain's Home Secretary when the First Fleet set off from Plymouth in 1787. Thomas Townshend, first Baron Sydney of Chislehurst (and the last Baron Sydney too, since the title died with him) was described by his successor, Lord Grenville, as "unequal to the most ordinary business of his office". Somehow Sydney's name, intended only to cover the waterfront, came to cover the whole town. Albion just sounded too pretentious for an open-air jail, designed purely as a dumping ground for Britain's surplus convicts.

Dr Tim Flannery of the Australian Museum, who wrote a million-year history of Australia called "The Future Eaters", wants the city to revert to the Aboriginal name. "I think the name Weerong for Sydney should be put forward as a serious proposition," Dr Flannery says. He thinks the change would symbolise that we are no longer Europeans. "We have had to adapt to Australian conditions, we have had to become more aboriginal in the true sense of the word — a people belonging to a place". A change of name is not unprecedented. The place the British named Rose Hill reverted after several years to its Aboriginal name — Parramatta.

I'm rather partial to the name Cadigals for we who live around the harbour. It trips off the tongue more comfortably than "Sydneysiders". But renaming the whole city? Are the Cadigals bold enough to take that step after more than 200 years? Perhaps Weerong sounds too much like an admission that the whole thing was a big mistake.

The style
Casual is the word. The bumper sticker that says "I'd rather be sailing" sums up the Sydney attitude. The sticker could equally say "I'd rather be drinking coffee in a street cafe". If traditional Australia was the land of meat pies and beer, then modern Sydney is the land of focaccia and cappuccino. We've got the Mediterranean weather, and in the past 30 years we've developed the attitude to match.

Being punctual for a social engagement means arriving within an hour of the appointed time — after that, you're starting to look a bit late. Socialising with friends means going out for yum cha or coming round for a barbecue rather than sitting down for a dinner party. Dressing up means ironing your jeans. I can't think of a single restaurant in Sydney these days that requires men to wear a jacket and tie for dinner, although that rule may survive in some of the stuffier clubs. A few pubs refuse admission to people wearing thongs.

Everyone uses mobile phones, usually to discuss real estate or to announce "I'm just walking into your building now". Those Sydneysiders who got annoyed in the early 1990s when they saw people talking on mobile phones in restaurants are now doing it themselves. Tipping means leaving ten per cent in a restaurant if you really liked the service, and about five per cent otherwise. A dollar is nice for someone who carries your bags in a hotel, but if you don't have the change, don't worry about it. In taxis, it's common for the driver to tip the passenger by rounding the fare down to the nearest dollar if it's five or ten cents over. Passengers sometimes round the fare up to the nearest dollar if the driver hasn't been too unpleasant during the journey, earning themselves an "Oh thanks, have a good day".

Sydney has a small way to go yet before it becomes fully Mediterranean. The residual Anglo Saxonism means most of us have not yet discovered the advantages of siesta, late night dining, and living in the central business district (which tends to be dead at weekends). But those advances cannot be far away.

The tourists
It's hard for Sydney people to accept that our major role in life these days is entertaining visitors. Once upon a time, Australia's biggest moneymaker from overseas was wool, most of it shipped out of Sydney. Now the nation's biggest earner is tourism, which adds $14 billion a year to the Australian economy and creates more than 200 000 jobs.

Sydney does most of the work for that money. Of the 3.7 million people who visit Australia each year, more than two million spend time in Sydney. About a third of the foreigners who holiday in Sydney come from Japan. The next most eager arrivals come from New Zealand, Britain, the USA, South Korea and Taiwan. But the biggest spenders per head are visitors from Germany, Indonesia, Scandinavia, Canada, Hong Kong and Malaysia, so we have to figure out ways to attract more of them. The lowest spenders are New Zealanders.

Eight of the ten favourite attractions in Australia — as nominated to the Bureau of Tourism Research by overseas visitors — are in Sydney (the other two are Uluru in Central Australia, and the Barrier Reef in Queensland). The attractions most remembered by departing visitors are the shopping, the beaches, the Opera House, the Harbour (particularly the Bridge), the Rocks, Sydney Tower, Darling Harbour and the Blue Mountains. So far, we've only talked about foreigners. Sydney is also the drawcard for visitors from elsewhere in Australia.

Australians spend $32 billion a year travelling in their own country. Nearly a third of all nights spent away from home are in Sydney. The major place of origin for visitors to Sydney is "elsewhere in NSW", followed by Victoria. Sydney accommodates these visitors in more than 300 hotels and motels, with 67,000 beds, which earn some $832 million a year.

The history
It almost went nowhere. When the first Governor, Arthur Phillip left Sydney Cove in 1792, there was little reason to think that this concentration camp in the south seas could survive without constant infusions from Britain. A few struggling farms at Parramatta could not meet the colony's food needs. There was nothing to justify the optimism of the first free settlers who arrived in January 1793 — five men, one woman and two children who were given a land grant in what is now called Strathfield but was then called Liberty Plains.

In 1795, Sydney produced its first export — a shipment of mahogany and cedar from trees cut along the Hawkesbury River, sent off to make British boats and furniture. It was soon followed by shipments of whale and seal products, which formed the basis of the Sydney economy for the first 30 years. What changed things was the merino. The sheep carried to Sydney by the first few fleets were simply for eating, but John Macarthur and Samuel Marsden bought a small flock of merinos from the Cape of Good Hope in 1798 and started breeding. The first commercial shipment of wool left in 1807, and within 40 years, Sydney was supplying half of the wool used in the clothing mills of Britain.

By the early 20th century, wool was providing 60 per cent of Australia's export income. In 1803, Australia's first newspaper, The Sydney Gazette and NSW Advertiser, was published, but the first convincing evidence that Sydney had a future came with the establishment of the Bank of NSW in 1817. By the 1830s, there was a growing sense in Europe that Sydney might be a place where you could get rich quick. In 1842 (two years after the convicts stopped arriving) Sydney was officially incorporated as a city, and a year later, the first elected Legislative Council began to take over the powers of the governor.

The 1850s saw a gold rush just west of the Blue Mountains, and when that petered out, coal mining became a useful source of income, helped by the spread of the railways in the 1860s. Between 1860 and 1890, Sydney's population rose from 100 000 to 400 000, inspiring a building boom which hardly faltered during the depression of the 1890s. In 1901, Sydney was the scene of the official celebrations for the federation of six colonies into a new nation called Australia. The new national government (temporarily operating from Melbourne) decided to base the Commonwealth Bank in Sydney in 1912, and by the 1920s, we were Australia's richest and most hedonistic town.

In 1922, the visiting British author D H Lawrence wrote that "Sydney goes by itself, loose and easy, without any bossing". Sydney scraped through the Great Depression more comfortably than other Australian cities due to the jobs created by the construction of the Harbour Bridge and the underground railway system. And once the Bridge was opened in 1932, the north of the Harbour could be developed. The construction of the Opera House, between 1956 and 1973, added another icon to the cityscape.

But for all its wealth and energy, the city lacked diversity. The vast majority of its citizens were of English or Irish background, which meant a blandness in the cooking, the culture, and the range of ideas. This began to change in 1947 when the national government, under the slogan "populate or perish", encouraged massive immigration from Europe. Over 40 years, a million new arrivals — many of them speaking Italian, Greek or a Yugoslav language — transformed the city. And when the immigration program expanded in the late 1970s to include Asia and the Middle East, Sydney could look forward to becoming a city of infinite surprises.

The gossip
Sydney might just be the urban myth capital of the world. But we specialise in a particular kind of mythology. This big tough city, which is so cynical about most things, throws away its scepticism when it hears tales about the hypocrisy or the perversity of the rich, the powerful and the famous. We love to talk about the prominent businessman who strangled his girlfriend's cat to punish her for rejecting him; and the television host who liked to lie under a glass-topped coffee table while women stood on it and urinated; and the state premier who received $5000 in a brown paper bag every week in return for keeping the police away from the illegal gambling casinos; and the former Liberal Party leader who liked rough sex and who broke a prostitute's jaw in a room in the poshest hotel in town.

When we hear stories like that, we ignore common sense and spread them assiduously and uncritically to our friends and acquaintances. In the 1980s, several journalists spent a fair amount of time trying to check out a rumour that Paul Landa, the then Attorney-General of NSW, had died on the tennis court of Abe Saffron, a man described as a major criminal in several public inquiries. Now Paul Landa did in fact die of a heart attack on a tennis court, and there were allegations that Landa was corrupt, both as Attorney-General and in his former role as Planning and Environment Minister. But whatever people may have accused him of, nobody ever accused Landa of being a complete idiot, and the notion that an attorney-general would risk being seen playing tennis with the man known as "Mr Sin" is just absurd. Still, Sydney took it seriously.

In one month during the late 1990s, in my capacity as a columnist for The Sydney Morning Herald, I heard the following rumours: a former political leader (male) was regularly seen holding hands with a young man in various Sydney restaurants; the father-in-law of another political leader had threatened to stop raising funds for the party unless the politician stopped having an affair with his secretary; another former political leader had turned gay and had an affair with a pianist or alternatively a violinist from the Sydney Symphony Orchestra; a former political leader had left his wife because she had an affair with a pianist or a violinist; a former political leader was having an affair with a TV newsreader (then the person who told me that rumour phoned to correct it — actually the politician was having an affair with a magazine editor whose name sounded similar to that of the newsreader); a former political leader was having an affair with a prominent businesswoman; a former political leader was being treated for clinical depression. And, in a twist that I particularly liked, a rumour that all those rumours about the former political leader's affairs were being spread by the wife of another former political leader.

These are the campfire fables that bind the Sydney tribe together. We can trace this style of storytelling back to the convict days, when the only way the inmates of the prison camp could fight back against their jailers was to spread malicious stories about them. We all know what's going on between Governor Phillip and Bennelong, don't we? You know why Governor Macquarie keeps having those fits of rage, don't you? He's in the tertiary stages of syphilis. Everybody knows why these dreadful buildings are going up around the harbour — Francis Greenway is in the pocket of the developers. What do you think John Macarthur is doing out there at Parramatta with all those sheep he's importing? Or is he just spinning a yarn? Another name for this sort of behaviour is the tall poppy syndrome, which I think is Australia's healthiest national trait.

Australians don't make heroes easily. Being sceptical about our prominent figures is a great protection against the disappointment that Americans so often feel when the people they worship turn out to have scandalous private lives. When you start, as Sydneysiders do, from the assumption that everyone is corrupt or perverse, you can only be pleasantly surprised. I think we often repeat these rumours as one might tell a fairytale to a child — to entertain and to convey a moral message. Every time we recount these fables, we are celebrating a 200-year-old folk tradition. In Australia, spreading scandals has the same heritage significance as clog dancing in Holland, or changing the guard at Buckingham Palace, or drinking beer in Munich during Oktoberfest. We may laugh or cringe, but if we stop doing it, we lose a precious symbol of our national identity.

I think it's time we turned this Sydney tradition into a money-maker. We should set up an annual festival of malicious gossip. It could be called Skandalfest. The posters advertising it would be decorated with a tall poppy and an approaching axe to cut it down to size. Tourists from every nation would flock to see it. All defamation laws would be suspended for that week, and the rich and the powerful would be expected to take whatever was thrown at them for the sake of the economy. Perhaps rumour-mongering should be made an event for the Olympics. With a team chosen in Sydney, The Aussies would certainly win gold.