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The impression given by the word digger is that it originated in the trenches. It is claimed that it was originated by Captain Sandy, afterwards Lieutenant-Colonel Sandy, DSO, who invariably used the greeting “Good day digger”. True, it did not come into general use until about the same time as ANZAC was coined. However, Bill Beatty (see source) is of the opinion that the term traces back to the brotherhood of the Men of Fifty-Four, Eureka’s Seal of Mateship: on December 3 1854, the gold diggers of Ballarat, entrenched in the famous Eureka Stockade,defied a hundred mounted soldiers and police and one hundred and seventy six infantry in their fight for liberty and justice.
Source: A Treasury of Australian Folk Tales and Traditions by Bill Beatty