Flag Adopted: circa 1867
Flag Proportion: 1:2
Use: State Ensign
New South Wales was formally created on 7 February 1788 as the first Australian colony, but had no official flag of its own (other than the Union Jack) until 1867.
The first flag of New South Wales was simply a British Blue Ensign defaced with the letters "NSW" in white in the fly, and was designed (as were all state flags) to comply with the recently passed British Colonial Naval Defence Act of 1865 which required that any colonial vessel should "wear the Blue Ensign with the seal or badge of the colony in the fly thereof."
To date, no official record of the approval or usage of the above flag has been found. However on 10 January 1867 New Zealand adopted, via proclamation, the first colonial flag in the region - a British Blue ensign defaced with the letters "NZ" in the lower fly. It is assumed NSW adopted its flag in response to this development.
References
Crux Australis
Anthony Burton (Editor), Flag Society of Australia, Melbourne, Australia.
"Australian State Flags (1865-1904): A British Admiralty Legacy", Ralph Kelly, Volume VIII No 4 October 1992.
Flag of Stars
Frank Cayley, Rigby Ltd, Adelaide, 1966.
Flags and Arms Across the World
Dr Whitney Smith, McGraw-Hill, New York, 1980.
Flags of Australia (chart)
John C Vaughan, Standard Publishing House, Sydney, 1983.