Carved out of New South Wales (NSW) in 1911 and transferred into the direct control of the federal government, the Australian Capital Territory (ACT) was created solely to provide a neutral location for a national capital. The rivalry between the two most powerful states, NSW and Victoria, was even more pronounced back then than it is now. It made sense for the capital to be situated somewhere between Sydney and Melbourne, and it was deemed important that the new city should have its own water supply, so as not to be held hostage by any state government.
Effectively the ACT is just Greater Canberra, along with a chunk of mountainous wilderness to the south (which provides that all-important water source). Come here to explore Australia's interesting little capital, and perhaps take a walk in the bush while you're at it.