Hobart, capital of the island state of Tasmania, is Australia's second oldest city. It is also its smallest, with a population of around 150,000. With its lovely setting on the Derwent River, in the shadow of Mount Wellington, it is described by admirers as the small jewel of Australian cities, with Australia's oldest theatre, oldest synagogue, oldest military barracks and best waterfront street, Salamanca Place. But can Hobart retain its old-world charm and still attract new economic prosperity?