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The first report of a European sighting of a koala was made on 26 January 1798, 10 years after British settlement. It was made south-west of Sydney, near Bargo. The report was not published until 1895 in the Historical Records of New South Wales, and this entry was accompanied by a note that gave the location as the mountains west of Sydney. This error persists in texts to this day, and it is misleading because the Blue Mountains are not a stronghold for the koala, whereas the south-west of Sydney has both the habitat, and a koala population that was present at first settlement and it is there today. The first material evidence of a koala seen by Europeans was provided by Barrallier, who obtained some koala paws in November 1802 near Nattai. Nattai is also south-west of Sydney, and is part of a regional stretch of habitat that includes Campbelltown, Nattai, Bargo, and to a lesser extent, the coast near Mt Kembla. It was either a koala from Hat Hill, now Mt Kembla, in August 1803, or a koala brought in by Barrallier in December 1802, that was the first living koala seen publicly in the colony. The conclusions drawn from the examination of the historical record are that koalas were not present in or immediately around Port Jackson, where the British settlement was established, but there was a population present to the south-west of Sydney. This population was present in the late 19th and early 20th century, and the population is still present today on the south-western, outer suburbs of the ever-expanding city of Sydney. It is thus the longest-known koala population to Europeans in Australia, and it is now part of the natural history of Sydney.

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