Morshead was born on 18 September 1889 in Ballarat, Victoria, the sixth of seven children of William Morshead, a gold miner who had emigrated from Cornwall via Canada, and his wife Mary Eliza Morshead, formerly Rennison, the Australian-born daughter of a fellow Cornish immigrant. William died when Morshead was six years old. He was educated at Mount Pleasant High School, where he was appointed a junior teacher in 1906.
In 1909, he became a student at the Melbourne Teachers Training College to obtain formal teaching qualifications. After his graduation in December 1910, he was awarded a scholarship to complete an education diploma at the University of Melbourne, but decided to defer for a year in order to teach at schools in country Victoria. He became a schoolteacher, teaching first at Tragowell in the Swan Hill district, and then at Fine View State School in the Horsham district. In 1911 he entered Trinity College at the University of Melbourne. After failing an exam in deductive logic, he decided to quit the state school system, and in 1912 took up a position at The Armidale School in the New England district of New South Wales. In 1914 he moved to the prestigious Melbourne Grammar School.
Morshead had been commissioned as a lieutenant in the Australian Army Cadets in 1908. At Armidale, he was appointed commander of the school cadet unit, and was commissioned as a lieutenant in the Militia on 10 February 1913. He was promoted to captain in September. At Melbourne Grammar he commanded a company in that school's much larger cadet unit. While at Melbourne Grammar, he met Myrtle Catherine Woodside, the daughter of a Happy Valley, Victoria, grazier, and the sister of one of Morshead's pupils.
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