Immigration were not the only care that pressed upon the mind of Sir George Gipps. He was entrusted in the management of the eastern half of Australia, a region stretching from Cape York to Port Phillip. There were, it is true, 150,000 inhabitants in the whole territory but the people were widely scattered. There were, in reality, two distinct settlements; one consisting of 120,000 people around Sydney, the other 30,000 around Port Phillip. The latter though small, was vigorous and inclined to be discontented; it was 600 miles from the capital and delays and inconveniences due to this fact caused great issues.

There was indeed a Superintendent in Melbourne and to him the control of the Southern district was chiefly entrusted. But Mr Latrobe was undecided and feeble. Though, personally, a worthy man, as a ruler he was much too timid and irresolute. He seldom ventured to take any step on his own responsibility (no matter how urgent the matter) and always waited for instructions from his superior, the Governor.

Under these circumstances, it was natural that the people of Melbourne should wish for an independent Governor, who would have full power to settle local affair promptly. In 1840, they held a meeting in a room at the top of the hill in Bourke Street, to petition for separation from New South Wales. But the following year the Sydney people held a meeting in the theatre to protest against it. This became yet another source of trouble to Gipps as the colony was divided into two parties, eagerly and bitterly disputing on the separation question. Governor Gipps and Mr Latrobe were not in favour of the separation and , by their opposition, they incurred the deep dislike of the people of Port Phillip. The authorities in England, however, were somewhat inclined to favour the idea and as Gipps was necessarily the medium of announcing their views to the colonists (and carry them into force) he became unpopular with the Sydney colonists also (rock and a hard place!). No man had ever occupied a more trying position and an overbearing, angry temperament, was not at all suited for soothing away its difficulties.