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The original inhabitants of Cawdor were the Tharawal and Gundungurra people, while another group of Aborigines in the Cowpastures area was called the Cubbitch-barta, the name coming from words for white pipe clay.
Cawdor was originally part of Camden Park, John Macarthur's extensive land holdings (10,000 hectares by 1825). Cawdor lies west of the Great South Road (now called the Old Hume Highway or Remembrance Drive) and is bounded by Razorback Mountain and Westbrook Lane. It is 65 kilometres south-west of Sydney, in the council areas of Camden and Wollondilly.
Cawdor was also part of the Cowpastures area, named after the herd of runaway cattle discovered there in 1795. The discovery of these excellent pastures encouraged interest in the south west from settlers frustrated by the depleted soils closer to Parramatta, and the heavy flooding of the Hawkesbury. Their interest, especially in the Nepean River, increased further after the severe drought of 1839.
Cawdor was the first village to develop in the Cowpastures district, predating Camden by more than 20 years. The name was given to the area by Governor Lachlan Macquarie to honour his wife's family's connection to Scotland (the Campbells of Cawdor). Macquarie established a cattle station in 1812 at Cawdor, which subsequently grew to be a large government settlement.
The first building was a slab hut built in 1803–04, followed by several other huts for use by shepherds and cattle overseers. In 1824 a court building was erected and became known as Fletcher's Gaol. It was a court of petty sessions and had a small body of police attached to it. It stood on what is now the site of the Uniting Church. The original church was probably built around 1851 and replaced in 1902 by the present building. The church is still in use and the cemetery is the resting place for many early settlers and their descendants.
Because it lay on the main convict-built road to southern NSW and Victoria, the settlement grew in the early 1830s, with a church and school, a store and a blacksmith shop. During this period there was a stopping place for mail and passenger coaches at the post office, opened in 1836.
In the 1850s, rural industries developed, such as sheep-breeding, wheat-growing and dairying. Wheat from Cawdor won gold medals at the Great Exhibition in London in 1851 and 1855. Burnham Grove, a homestead built in 1880 and originally owned by Samuel Wheeler, still survives as a wedding reception venue.
At the time of the Lambing Flat riots in 1861, troops with horse-drawn field guns travelled by rail to Campbelltown, then by coach via Cawdor to Young.
In 1888, a national school was established two kilometres from the church, along Cawdor Road. It is now Cawdor Public School.
In later years, the village of Cawdor faded away, due in part to the lack of a reliable water supply and the development of Camden by the Macarthurs. However, the district continued to thrive, with its milk being sent to Sydney and with a creamery built at Cawdor.
In 1902, the Goulburn-to-Sydney bicycle race (which predates the Tour de France) began, and the riders travelled via Old Razorback Road.
In the 1960s and 1970s, both the eastern and western sides of Cawdor Road were subdivided and sold, but in the early 1990s local residents were successful in opposing a proposed development of 7,000 houses and in 1994 locals and politicians successfully opposed a 4,900-lot development for the Cawdor area. While housing development continues apace all around the Wollondilly and Camden council areas, Cawdor remains undeveloped, mainly due to floodplain restrictions.
Cawdor today is home to industries such as hydroponic vegetable growing, poultry farming and horse breeding.
In 2001, Camden High School (built in 1956) was moved from the centre of Camden township to Cawdor Road, which enabled a sports ground and agricultural plot to be extended significantly. The school is set on 6.5 hectares, with beautiful views of the Razorback Range.
In May 2008 a development application for a proposed Muslim school near the High School was rejected by the council amid much controversy. Since Cawdor is south of the proposed south-west growth area and remains flood affected, the new developments of the growth area will not affect the suburb directly.