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The area has been inhabited for at least thirty thousand years by Aranda Aborigines, who moved between the waterhole of Alice Springs (Tjanerilji) and other reliable water sources in the MacDonnell Ranges. But, as elsewhere in The Territory, it was only the Overland Telegraph Line's arrival in the 1870s that led to a permanent settlement here. Following John McDouall Stuart 's exploratory journeys through the area in the early 1860s, it was the visionary Charles Todd , then South Australia's Superintendent of Telegraphs, who saw the need to link Australia with the rest of the empire. The town's river and its tributary carry his name, and the spring that of his wife, Alice.

With repeater stations needed every 250km from Adelaide to Darwin to boost the OTL signal, the site just north of today's town, with its permanent "spring" (actually a billabong on the Todd River), was ideal as a place to erect the necessary buildings. When a spurious ruby rush led to the discovery of gold at Arltunga in the Eastern MacDonnells, Stuart Town (the town's seldom-used official name in its early years) became a jumping-off point for the long slog to the riches out east. Arltunga's goldrush fizzled out under desperate conditions, but the township of Stuart remained, a collection of shanty dwellings serving a stream of pastoralists, prospectors and missionaries.

In 1929 the railway line from Adelaide finally reached Stuart Town. Journeys that had once taken weeks by camel from Oodnadatta could now be undertaken in just a few days and by 1933, when the town officially took the name Alice Springs, the population had mushroomed to nearly five hundred Europeans. In 1942 the bombing and subsequent evacuation of Darwin saw Alice Springs become The Territory's administrative headquarters and a busy military base, supplying the war zone in the north. After the hostilities ceased, some of the wartime population stayed on and Alice's fortunes continued to grow slowly. In the meantime, wealthy tourists began to visit the mysterious monolith in the desert, southwest of town - for thousands of years a store of sites sacred to the Anangu.

With the reconstruction of the notoriously unreliable rail link from Adelaide and a new, tar-sealed, Stuart Highway completed in the mid-1980s, Alice has only recently attained its present size and unexpected modernity. A tourist boom at that time, helped in no small measure by the massive publicity surrounding Azaria Chamberlain's reputed canine abduction at the Rock (as portrayed in the movie A Cry in the Dark ), has waned a little in recent years, but Alice still remains the undisputed "capital" of the Outback. Even so, the population remains tiny: within a thousand-kilometre radius of "The Alice", as it's affectionately known, there are fewer than forty thousand inhabitants. The town has embraced tourism wholeheartedly and although the continuing improvements of the on-site Ayers Rock Resort has affected trade, Alice still seems set to succeed, primarily because both the town and surrounding area have much to offer, even without the obligatory visit to the Rock.