Why am I "happy as Larry"?
John Ayto, Oxford Dictionary of English Idioms, third edition (2009) includes a brief discussion of "happy as Larry" under a primary entry for "happy as a sandboy":
happy as a sandboy extremely happy ; perfectly contented with your situation.
An 1823 dictionary describes a sandboy as an urchin who sold sand in the streets, and according to the same source the expression jolly as a sandboy was already proverbial by that date for 'a merry fellow who has tasted a drop'. A common British version of the phrase is happy as Larry, Larry being a pet name for Lawrence. This saying is sometimes connected with the renowned boxer Larry Foley (1847–1917); on the other hand, it may owe something to larry, a dialect word used by Thomas Hardy, meaning 'a state of excitement'. The North American version is happy as a clam, which apparently originated in the early 19th century on the east coast, where clams are plentiful: the full version happy as a clam at high water explains the source of the clam's satisfaction.
The only instance of larry that I've been able to find in British regional glossaries of the nineteenth century is from Georgina Jackson, Shropshire Word-Book (1879):
LARRY [laar'-i'], sb. a confused noise, as of a number of people all talking talking together.—Pulverbatch. 'I 'eärd a fine larry las' night—folks gweïn down the Moat lane.
But that same word-book has an interesting definition for Larrance as well:
LARRANCE [laar'-uns], sb., var., pr. the genius of idle people. They are said to have Larrance on their back. Com. 'That chap's got Larrance on 'is back, 'e dunna do 'afe a nour's work in a day.'
So might "happy as Larry" mean "happy as the genius of idle people [that is, 'happy as Larrance']"? I don't know, but it sounds pretty happy.
First printed reference that I can find to the phrase in the National Library of Australia TROVE database is a letter to the editor of the [Wollongong, New South Wales] Illawarra Mercury and Southern Coast Districts Advertiser (November 23, 1857), under the title "The Murray Land Bill, No. 2". Here is the portion of the letter in which it appears:
Mark the poor man's progress. He reads and dreamt; of the bright, sunny land of Australia; of its millions of acres of waste land only wanting to lie occupied, cleared, and cultivated, to make him rich and independent,—that is comparatively so ; he dreams glad dreams of peace and plenty for self and family, and, despite his strong love for the land of his birth, even for his own smoke-colored mud edifice, and the pig in the parlor, he makes up his mind to "go emigratin," and in due course finds himself, on the wide waste of waters, an adventurer for the good things of Australia, where he has landed "with a light heart and thin pair of breeches," ready and willing for anything, looking forward to the "bit o' land" which is to make himself, and Judy, and the gorsoons, both boys and girls, gintlemin for life. "Begorra, Judy, asthore, we'll be all gintlemin intirely when we get to Austhralia, so don't be lettin on so about lavin the ould country ; put down your praskeen, ma collendhas, an don't be cryen the eyes out o' yer head ; look at little Molly there roullen about the floor, sure we'll make a lady of her ; an, with the blessing of God, we'll send for the ould father and mother, an we'll all live together, like Brown's cows, and be as happy as Larry." So argues Pat, and no doubt so argues John Bull and Sandy.
The phrase is obviously already a cliche when used by the letter-writer.
According to The Phrase Finder, this either refers to a boxer or a type of hooligan.
There are two commonly espoused contenders. One is the Australian boxer Larry Foley (1847 - 1917). Foley was a successful pugilist who never lost a fight. He retired at 32 and collected a purse of £1,000 for his final fight. So, we can expect that he was known to be happy with his lot in the 1870s - just when the phrase is first cited.
The alternative explanation is that it relates to the Cornish and later Australian/New Zealand slang term 'larrikin', meaning a rough type or hooligan, i.e. one predisposed to larking about. 'Larrikin' would have been a term that Meredith would have known. The earliest citation of that is also from New Zealand and also around the time of the first citation, in H. W. Harper's Letters from New Zealand, 1868:
"We are beset with larrikins, who lurk about in the darkness and deliver every sort of attack on the walls and roof with stones and sticks."