Caledon lies in an intensively cultivated agricultural region in which arable farming and sheep-rearing are the principal sources of income. The town grew up round its mineral springs, which were frequented by the first European settlers in the 18thC and are still used for medicinal purposes. There are seven springs, with a total daily flow of 90
0,000 liters (200,000 gallons) of water containing iron and other minerals; six of them are hot, with temperatures around 50°C/122°F, and one is cold. A new hotel was opened in 1990.
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