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The town of Palmerston, in New Zealand's South Island lies 50 kilometres to the north of the city of Dunedin. It is the largest town in the Waihemo Ward of the Waitaki District with a population of 890 residents. Palmerston grew at a major road junction: State Highway 1 links Dunedin and Waikouaiti to the south with Oamaru and Christchurchto the north, whereas State Highway 85 (known colloquially as "The Pigroot") heads inland to become the principal highway of the Maniototo.


The Main South Line railwaypasses through the town and a tourist train, the Seasider travels from Dunedin to Palmerston and back once or twice a week. From 1880 until 1989, the town acted as the junction between the main line and a branch line that ran inland, the Dunback and Makareao Branches.

Palmerston stands near the banks of the Shag River, five kilometres inland from the Pacific coast. Between it and the sea stands the lone hill of Puketapu ( Maorifor sacred head, known by Southerners as Holy Hill), crowned with a monument to the 19th century Otago politician Sir John McKenzie. An annual race takes place up to the memorial and back which is called the Kelly's canter dedicated to Albert Kelly who ran up Puketapu as a constable in the Palmerston police force every day during World War II.


Many people confuse the town of Palmerston with the much more populous North Island city of Palmerston North, whose residents often call their home simply "Palmerston". Otago's town has the earlier claim to the name, however - its surveying dates from 1862, whereas the northern city did not receive its name until 1871. Both towns take their names from Lord Palmerston, the 19th-century British Prime Minister.


The nearby Shag River, whose name causes visitors much amusement, especially those from Britain, is named for the cormorant, a sea bird which also ventures a little inland, colloquially known as a 'shag'. The river's Maori name, 'Waihemo', has been translated as 'Dwindle River'. It is thought to arise from the river's tendency to reduce in summer to a small stream. Palmerston used to be the capital of the Waihemo County, the surrounding district, before it was amalgamated with the Waitaki District in 1989.


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