On the 23rd of December 1865 the Sisters at the Convent of Mercy opened an Industrial School known as St Joseph's to provide a home for girls who had been given court sentences. The Sisters also took in children who had been deserted or abused by their parents or who had been labeled as uncontrollable. Like the orphans, these children often had tragic histories. Many had been living in slums, on the streets and some had been rescued from the brothels of Geelong.
On admission to St Joseph's, the girls educational standard was assessed according to their skills in reading, writing and ciphering (arithmetic). In the period 1865 to 1880 the school register showed that only two girls entering the school were judged as having reached a "fair" standard and the rest were virtually illiterate. The Sisters' intention was to give these children a basic education and to prepare them for useful lives as domestic servants.
The Sisters took the radical step of housing these troubled children with the "respectable" orphans. It was a social experiment that worked and in 1872 Royal Commisioners observed that the girls in the Industrial School appeared not only bright and healthy but natural and homelike and had nothing of the "cowed and restrained listless aspect" of reformatory children elsewhere. Despite the success of the school the Sisters found it hard to pay bills for food, clothing and bedding and the Foundress Mother Xavier Maguire often wrote of her "embarrassment" at being unable to meet the financial obligations of maintaining the orphanage and Industrial School