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tion hitherto has been made up of farmers and runholders. It is growing up into importance owing to the extension of the railway and settlement on the agricultural blocks. Having recommended the Government to open up another block of 3,000 acres I hope to be able to report more favourably on this division in another year. The system of proclaiming blocks divided into sections of 320 acres is already proving itself to be one of the wisest provisions for settlement ever yet introduced in New Zealand. Last year the trains from Invercargill came to within 3G miles of Kingston, in January last to within 18 miles, and now, while lam writing, to within 10 miles. The completion of the railway to Lake Wakatipu, it is anticipated, will be accomplished in June next. Agricultural industry during the past year has taken a decided turn for the better, when compared with the two preceding years. Those farmers who were fortunate enough to hold any considerable quantity of grain from the harvests of 1876-77 realized handsome prices, while cattle cammanded a good figure. "Wool has not been quite so satisfactory, as the market has been anything but steady. Still in few cases have the growers had any serious grounds for complaint. One grave error our farmers make is pursuing the practice of cropping beyond the first remove from the merino, the result being a coarse, kempy, tender wool, by no means a favourite with the wool buyers. Were they to content themselves with one crop from a choice long-woollcd ram and ordinary merino ewes carefully selected they would be enabled to produce a wool which would command at all times a paying price ; but sheep-keeping in connection with grain-growing is, comparatively speaking, a new industry, arising from the low prices ruling for cereals a few years ago, and in course of time will be followed more systematically than has yet been done here. Pigs at all times are a profitable kind of stock, and most of our farmers have done very well in that line, being able to dispose of all they could spare at from about 5d to 7d. per lb. dead weight. Horse-breeding is by no means what it might, with management, be made, as the rule seems to be to breed from any kind of mare by any kind of horse, without regard to the suitability of either. This year's crops have been very much above the average of past years, fifty bushels and sixty bushels being by no means an extravagant estimate for wheat upon some of our best farms, the yield of oats being proportionately fruitful. Should prices be anything like good our farmers will many of them become to a large extent independent, and those who have not yet bought their farms will now be in a position to do so. Any properties that have changed hands lately have realized good prices, one small farm, in a good situation, going as high as £12 an acre, and considered a safe investment at that. A proof of the favour in which farming is held in this district lies in the eagerness with which the Arrow River and other mining reserves were applied for under section 59 of the Mines Act. When the Crown Terrace is thrown open we may look for a great rush for sections, notwithstanding the difficulties with which settlers will have to contend when compared with those whose holdings are more favourably situated. Rabbits are getting to be a serious nuisance in the pastoral districts, in one instance the carrying capabilities of a run have been reduced to the extent of 10,000 sheep, entirely through their ravages. Scotch thistles also are getting very numerous in some quarters, and for the present at least interfere to a considerable extent with the carrying capacities of the land. Even with the drawbacks I have just mentioned, we may safely place every confidence in the agricultural future of the county, and, were we in possession of more ready means of transit to the seaboard, farming prospects in our midst, thanks to our beautiful climate, would compare very favourably with those of other parts of the colony. The increased area granted to miners for residence and garden has tended very much in increasing settlement. There was but little inducement to remain in one place under the old system of half an acre and compulsory residence; the more liberal rule that extended the limits to one acre, and for cultivation as well as residence, has effected so much good that I would strongly recommend an increase to three acres. Ten per cent, of our population of 4,000 have taken advantage of this boon, and on the sunny slopes of our ranges may be seen pretty gardens well laid oft' with vegetables, bushes, flowers, and trees, the latter so much needed in this otherwise treeless part of New Zealand, the whole surrounded with gorse and quick fences. The fencing in of gardens has brought about a better style of house being built by the mining class, and following this improvement, in many cases, marriage, children, contentment with less returns of gold rather than moving about, and a disposition to settle —a quality so much to be encouraged in this colon)'. Townships. —Great improvements have been made in the several townships of the district since my last report; the primitive wooden structures are being pulled down to make way for stone houses. Building-stone (a kind of rubble) is to be found in large quantities all over the district, and stands exposure to the weather very well. Trees are being planted by the Corporations, and, so far, have withstood the frosts. The provision for making waterworks in the new Municipal Act require amendment, so far as to permit of more liberal interest to the lender than 7 per cent.; this low rate has prevented the Corporations from being able to borrow money to bring in water, so much needed for the public health, and irrigation. Queenstown, as far as regards its population, has arrived at its lowest ebb. There seems to be but one opinion as to its rise again as soon as the Kingston Railway is completed. The departure of Mr. B. Hallenstein, a wealthy landowner and merchant, and the death of Mr. J. W. Robertson, an enterprising merchant, has had a depressing effect on a small town of 600 inhabitants like Queenstown, which will nevertheless rally again, owing to its beauties of scenery and healthy climate, in spite of all the obstacles placed in the way to retard its progress by the resident traders, who, blind to their own interests, persist in keeping up the prices of 1863, or nearly so, for every species of merchandise. The accommodation for tourists, who are on the increase, is excellent, but the charges cause dissatisfaction, and keep travellers away. The same remarks apply to the price of town sections, wages, and everything for which money has to be paid. Probably some lhtnedin and Invercargill people might be induced to build and reside at Queenstown three months in the year, if they could do so at as cheap a rate as they can at their own places, and there is no reason why they should not. Arroictoion has emulated the example of her big sister (Queenstown) but not suffered so much in