Start with the Easiyo kit available from many Australian supermarkets for around $20.00

Follow the instructions in the kit - that is:
Bring @ 1.5 litres of water to the boil

Add the contents of one pack of yoghurt mix to the container - approx 300ml of powder. Best to add some water first, say 200ml. Cap container, and shake the shit out of it. Err... shake well.

Add the boiled water to Easiyo larger container - the one that's sort of like a cylindrical Esky, as per instructions, to the mark inside the container just above the red insert.

Leave to cool for 8 hours, then remove inner container and place it in the refrigerator. When cool, it should be gelled and totally delicious.

If all the above goes well, try this:

Use 1 heaped tablespoon of Easiyo or similar mix to 300cc of milk powder (300ml in the measuring jug). Leave for 12 hours, then refrigerate.

Cost: around $1.25 per kilogram. Really fresh, really healthy, and good clean fun. No yogurt container to dispose of, either.

You can use the yogurt culture to make your next batch, rather than the mix from the packet. Just leave the last couple of spoonfuls in the container, half fill with water, add 300ml milk powder and shake well.

Using this method you may need to leave it longer than 12 hours, even as long as 36 hours. Personally, I find 12 hours is fine.

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Making Yogurt with Pasteurised Fresh or UHT Milk
http://www.wikihow.com/Make-Yogurt