The chapter opens shortly after William's arrival in New South Wales with his family in 1806. In accordance with the laws governing convicts, William must be assigned to a master until he can earn a ticket of leave. As Sal is a free person, William is bound over to her. The couple approach the fact that Sal is now William's master with a sense of humor and quickly get on with improving their lot in the settlement at Sydney.
The government issues William and his family (now with the addition of Dick, who was born in Cape Town during the voyage) a hut, a couple of blankets, and a week's worth of food. The settlement itself is primitive, covered with mud-daubed huts and make-shift shelters constructed under overhanging rocks. The wharf contains the only solid structures in the settlement. A dense forest surrounds the settlement, trapping the convicts and their families in the clearing. At the beginning, the Thornhills turn their backs on the land outside of the settlement with its foreign trees, animals, and sounds and focus on the wharf at the bottom of the hill, their connection with England and their former life. As William discovers, water is water, whether it be the Thames or the Sydney Cove, and a waterman can always find work hauling the unending loads of goods between the wharf and the ships.
William finds work as a waterman with Mr. King, transporting the casks of Jamaican rum, French brandy, and Ceylonese gin that pass through the colony. William returns to his trusted method of skimming off alcohol from the casks by making little holes under the metal rims. As rum serves as the colony's main currency, the stash of rum William siphons from the casks soon improves the Thornhill's economic position. They move into a bigger hut down by the stream. Although still made of mud, the hut has a stone fireplace and sod-lined bark chimney. Sal decides to divide the hut into two rooms with a piece of canvas and opens a little bar in one of the rooms, plying Mr. King's rum to the ever-thirsty settlers.
William and Sal are happy despite the initial hardships and the foreign terrain. They understand that a man can do well for himself in New South Wales if he works hard and does not succumb to drink. Convicts could earn a full pardon and make their fortune. Free of the social strictures of England, men can work their way up in the world and become masters in their own right. William works the water, and Sal pours glass after glass of rum. At night, they count up the day's takings and hide the money in a box under their bedding. They dream about saving enough money to return to London and buy a small house just like the one on Swan Lane. This time, they would make sure to own the leasehold, so that it could never be taken away. Williams would purchase a wherry and get an apprentice to row. He dreams of becoming a respectable man in the neighborhood like Mr. Middleton.
Sal struggles with the absence of all things familiar: the weather is too extreme, the trees more grey than green, the forest too dense and impenetrable, the evening darkness too sudden, and Christmas too sunny and hot. Everything that Sal and William owned had been sold before they left London or stolen on the trip. The only reminder Sal has left of home is a piece of clay roof-tile that she found by Pickle Herring Stairs the morning before they left London. That piece of clay tile is her most precious possession. She even names their little rum bar The Pickled Herring.
An Aborigine nicknamed Scabby Bill (in reference to the ornamental scars that cover his chest) lives in the areas around the Thornhill's hut, often sleeping propped against their back wall at night. Scabby Bill has abandoned his traditional lifestyle to beg for food and drink in the settlement. Sal gives him bread and rum in the hope that he will leave them alone. However, Scabby Bill always returns. Sal and William often use him to attract customers by giving him a drink of rum in exchange for a dance. The settlers crowd round The Pickled Herring to watch Scabby Bill dance drunk and naked in the dirt.
While Scabby Bill and others like him lived in the settlement, other Aborigines inhabit the forest just beyond the clearing. They are almost invisible, blending in with their environment and retreating as the settlement expands. William catches glimpses of silhouettes against the sun or canoes on the water. At night, their camp fires can be seen glowing throughout the surrounding forest. While the Aborigines did not have fields or buildings that demonstrate their claim the land, occasionally they threw their deadly spears at the white men encroaching on their forest. William does not mention the spearings to Sal, but she reads about it in the settlement's paper. The killings increase her unease and keep her mind focused on their return to London.
William receives his ticket of leave after a year in New South Wales. The family is doing relatively well and can afford to eat meat three times a week. Sal gives birth to another son, Bub, who is a sickly and fussy baby. While Sal runs The Pickled Herring, William continues to work for Mr. King, taking his extra little bit off the top. After three years, Mr. King hires a new clerk, who pays closer attention to the goods. William decides to leave Mr. King before he gets caught stealing. William meets Thomas Blackwood, an acquaintance form London. Blackwood has a full pardon and solid boat, which he uses to transport goods between Sydney and the settlements along the Hawkesbury river. William goes to work for Blackwood.
On his first trip up the Hawkesbury, William is amazed at the rugged, natural beauty of the areas. The river and its surroundings are teeming with life, including a seemingly endless number of oysters. William falls in love with a promontory in the river that he secretly names Thornhill's Point. He listens with envy to Blackwood's description of his place up the river and begins to dream about owning his own piece of land.
On this first trip, William also gets a glimpse of the complex and often violent relationship between the Aborigines and the settlers. As the boat enters the mouth of the river, William notices the smoke from the Aborigine camp fires passing the message of their arrival to members of their clan up the river. William also meets Smasher Sullivan, a settler on the Hawkesbury who responds to the presence of the Aborigines with violence. Blackwood tries to steer his boat away from Smasher's homestead, but Sullivan rows out to meet him. Smasher triumphantly shows Blackwood a pair of hands cut off at the wrist, claiming that the Aborigines won't dare steal from him again. Blackwood responds with disgust, and he and William row the boat out of Smasher's reach. Blackwood looks through the telescope at Smasher's homestead. He hands the telescope to William, who sees a bloated black figure hanging from a tree.
Blackwood tells William that nothing in the world is free, and one must learn how to give a little when taking a little. His comments are intended as a criticism of Smasher's intolerant and violent attitude toward the Aborigines. Blackwood understands that the land is populated, and that the white man must learn how live in tandem with the Aborigines. William does not fully understand what Blackwood means, but he remembers his words and tries to assimilate them into his own dealings with the Aborigines.
For several months, William nurtures his dream of claiming a piece of land along Hawkesbury in silence. When he finally shares his secret with Sal, she responds with disbelief, telling him that he knows nothing about farming. William tries to convince Sal that they should claim the land, but she does not want to take the risk. Sal thinks that they are doing fine as they are, saving up money to return to London and buy their house. Despite Will's conviction that the land will give them the money and security they both want, Sal refuses to consider settling along the Hawkesbury. William decides to drop the issue for the time being, but he does not give up on his dream.
Four years after his arrival, William receives a full pardon and is now a free man. Soon after, Blackwood decides to sell his boat and retire to his land on the Hawkesbury. Sal suggests that they borrow £115 from Mr. King and buy Blackwood's boat. While William and Sal both agree to buy the boat, they view it as a means to different ends. Sal sees the boat as a way of earning the money to return to London more quickly. For William, the boat represents the chance to finally claim Thornhil's Point as his own.
Williams bides his time, waiting another year before approaching Sal again about Thornhill's Point. He and Willie ply the trade between the settlers on the Hawkesbury and Sydney. The boat, renamed the Hope after Sal's father's best wherry, does a good trade, and William manages to pay back a quarter of the money owed to Mr. King. William decides that it is time to make the move on Thornhill's Point before someone else claims the land. At New Year in 1813, William approaches Sal again about settling on their own piece of land. Although Sal resists, she can hear the desire in William's voice. She knows that he wants that land more than anything else. She agrees to give five years to establishing Thornhill's Point in exchange for William's promise that they will return to London at the end of that time period.
William and Sal respond in different ways to the environment of New South Wales. William finds it liberating to be thousands of miles away from the rigid class and power structures of England. He sees men just like himself, born into poverty with no education, who have made their fortunes and achieved a social standing unimaginable in Britain. William wants to embrace the opportunity to shed his past with its sour taste of humiliation and inferiority and take his place among the new elite in Australia. Through the character of William, Grenville emphasizes the determination and grit of the early colonists, who built a new life out of nothing.
Sal does not share William's enthusiasm for their new land. While she recognizes the opportunities for economic advancement, she does not have the same need for social advancement as William. Sal would like to make enough money to return home and live in relative comfort. She does not aspire to anything more than the life she had as a child. She does not feel the sting of humiliation at the hands of the gentry or even the new masters in New South Wales as keenly as William, and therefore she does not possess William's drive to radically transform herself or her life. Grenville states that Sal's dreams stay "small and cautious,” defined by the life she knows and not by the new life offered in Australia.
William's dream of building a prosperous holding on Thornhill's Point creates the first rift in their relationship. Haunted by the memory of hunger and the loss of the house on Swan Lane, William wants the security that comes with possessing one's own land. He wants the power that he saw in the easy confidence of the gentry he used to row across the Thames. In 19th century England, land ownership was the reserve of the rich and powerful. No lowly waterman would ever dream of owning land in England. However, with the traditional rules suspended in New South Wales, William is determined to grab his chance to become a man who no longer has to bow and scrape to his social and economic superiors.
Part Three expands on the theme Grenville introduced in the prologue - the clash of civilizations between the white settlers and the Aborigines. At the beginning of the chapter, Grenville introduces Scabby Bill as a symbol of the negative impact of Western culture on the Aborigines. Scabby Bill abandons his traditional way of life after being introduced to rum. Scabby Bill fulfills the white settler's prejudiced expectations of the Aborigines. The white settlers considered the 'blacks' to be savages. If the Aborigines are not the target of the white settler's resentment, they are the target of fun. The settlers congregate at The Pickled Herring to watch Scabby Bill dance for a drink of rum. The ritual dances and songs of the Aborigines are mocked and ridiculed by the settlers, who view Scabby Bill as little more than a dancing monkey.
Grenville demonstrates the cultural abyss between the settlers and the aborigines when she writes, "There were no signs that the blacks felt the place belonged to them." The British colonists saw no reason not to take land and resources that had not been claimed by either public or private ownership. They took the absence of permanent structures and tilled fields to mean that the Aborigines had not invested in the land. In the tradition of the Protestant work ethic, a people that did not labor on the land or develop its resources were not considered to own that land. Merely existing on a piece of land was not enough to warrant the respect of British law or traditions. However, the fact that several settlers find themselves on the receiving end of a deadly spear indicates that the Aborigines see the land as their own and are willing to kill to protect it.
On the Hawkesbury, William witnesses the increasingly violent conflict between the settlers and the Aborigines. On his first trip up the river, William encounters two conflicting views how to approach the Aborigines in the forms of Thomas Blackwood and Smasher Sullivan. Blackwood is a humane man, who has learned to respect Aboriginal culture. He seems to be free of much of the racial prejudice of his countrymen and therefore does not hold the view that the colonists' white skin gives them the right to take what they want. He tells William, "A man got to pair a fair price for taking. Matter of give a little, take a little." Throughout the novel, William struggles to fully understand the practical reality of Blackwood's words - how much should he give, and how much should he take. This moral dilemma lies at the heart of the novel.
Smasher Sullivan, with his hatred for the black savages, represents the opposite point of view. Smasher believes that the settlers have the right to claim all of the land. He considers the presence of the Aborigines to be a nuisance that should be dealt with quickly and violently. He takes matters into his own hands, killing Aborigines who venture on to his homestead. Smasher's approach represents the growing consensus among the colonists and leads to the bloody dispersal of the Aborigines at the end of the novel.