Which territory is surrounded by New South Wales?

The correct answer is the Australian Capital Territory (ACT), which is indeed surrounded by New South Wales. The ACT was established in 1911 as a separate territory to serve as the location for the national capital, Canberra. Due to its position, the ACT is completely enclosed within New South Wales, making it unique among Australian territories and states.

The ACT not only acts as the political center of Australia, hosting significant government institutions and the national parliament, but it also features its own distinct landscape and culture. This proximity to New South Wales has resulted in close economic and social ties between the two regions.

The other options—Victoria, Queensland, and South Australia—are distinct states and do not share this characteristic of being completely surrounded by New South Wales. Victoria is located to the south of New South Wales, Queensland is to the north, and South Australia lies to the west. Hence, the unique geographical positioning of the ACT is what makes it the correct choice in this context.