I've not read Charles Dickens, nor am I an expert on convicts, but I'll give it a shot.

The historian John Hirst answered similar questions in his Australian History in Seven Questions. He argues that Australia become a wealthy and peaceful democracy because it was less a penal colony, and more a 'colony of convicts', meaning not just a prison but a functioning society that allowed for ex-cons to participate and thrive in. He gives numerous examples where convicts set the agenda, to the annoyance of the colonial authorities.

Punishment in the convict system was less the term served than it was exile and labour, and Sydney was always intended to be what Hirst calls 'a little republic of convicts', in that convicts form most of the social hierarchy in the colony. Convicts supervised other convicts at work, they joined the police force and garrison, they formed juries. If they wronged or were wronged themselves, they were treated as normal citizens in court, with no reference to their convict status and were innocent until proven guilty. The standard of living was also significantly higher than in Britain, and mostly because (early days) the colony was charging the British for its bills, importing goods like wheat flour, sugar, rum and tea. Only the best was acceptable to the convicts and their guards. They even had property rights - a couple on the First Fleet sued the captain for losing their luggage. These freedoms were intended in keeping things orderly - attempts were made by governors, free settlers and British governments at creating a more punishing system that favoured free settlers, but for various reasons this rarely worked out.

Labour was in such high demand that convicts could effectively strike, and it was common for them to put down tools in the afternoon and seek out private work for private pay. Anyone who could support themselves was quickly given a 'ticket of leave', so that the British government no longer had to pay for them, usually after less than half of their time was served. Those freed were then given land and could have convicts assigned to work for them as well. Specialist skills were always in desperate need, with most convicts being taken from the unskilled poor of the cities. This meant that anyone with some education, ingenuity or prior vocation could do extremely well for themselves, having a monopoly on skilled work in the colony - convict tutors, engineers, architects, shopkeepers. Ex-cons often worked for the wealthy gentlemen of the garrison, running their businesses for them. Colonies are expensive, and Hirst writes "a booming colonial economy trumped penal principles".

He contrasts Sydney with French penal colonies, saying that Sydney was unique in its freedoms for convicts, its prosperity and democracy, and its inclusion of women - it was intended to be a society. The transportation of female convicts meant that before long the colony had plenty of 'native-born' free settlers, some even born on the journey over, meaning that Sydney was never simply convicts and guards. Later prison reform in Britain tried to make New South Wales more punishing, but it rarely worked out as intended, as the colony was set in its ways and any attempts at reducing convict and ex-convict freedoms could seriously damage the colonial economy. The more modern system of prison, with its walls and solitary confinement, proved to be far too expensive, and was usually reserved as secondary punishment for the worst reoffenders.

Early export industries such as sealing and whaling were dominated by ex-cons and provided an enormous boost to local boat and ship-building, further boosting Sydney's economy. As seal and whale numbers began to decline, the New South Wales frontier spread beyond the Blue Mountains to encompass vast green plains created via Indigenous Australian fire-based landscaping. This led to the illegal seizure of land by squatters, several wars with the locals, but most importantly - a massive boom in the wool industry. It was hardly capital intensive - the only cost was the sheep, with a single convict shepherd was fed by the government caring for nearly a thousand sheep at once. Hirst states that Australian farming was never based on subsistence, like much of Europe or early North America, but rather started with a commercial intent and global export in mind. The wool boom also brought significant capital and free migration to Australia, as did the gold rushes of the 1850s.

This explosion in population still couldn't match those of New York or London. Other colonies were cheaper to travel to, and some might say more attractive, so even after the end of convict transportation cheap labour was never easy to come by, and masters had to treat and pay their workers fairly. Blainey says that the transportation of Luddites from England to Australia created the perfect conditions for Australia's once thriving union culture.

In the Rise and Fall of Ancient Australia, Blainey gives the example of three convicts who rose to great fortune: Samuel Terry worked as a stonemason, then an innkeeper, shopkeeper, and farmer, saving money and marrying a widowed freewoman, becoming likely one of the richest men in the colony; James Underwood became a merchant and shipbuilder, his ships used for transporting coal, sandalwood, whaling, sealing and even transporting convicts - he lived in a mansion larger than the governors; and Mary Reibey, who married a free settler and ran his businesses when he died, becoming a wealthy and respected businesswoman and philanthropist, and even getting commemorated with her face on the modern $20 bill.

I totally encourage those with more knowledge to contribute here.

We also have quite a lot of convict reading material in our FAQ.