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Preheat oven to 180°C and butter 2 round 6 inch tins, lining the base with baking paper.
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Mix the vinegar into the milk an set aside.
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Beat the sugar and eggs until light and fluffy.
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Into another large bowl, sift all the dry ingredients together.
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Add egg mixture, milk mixture and oil into the dry ingredients (except carrots and walnuts) and beat until just combined.
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Fold through the carrot and walnuts.
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Divide the batter evenly between the two prepared cake tins.
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Bake for 45-60mins or until a toothpick inserted into the centre of the cakes comes out clean.
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Allow the cakes to cool in tins for 10mins before turning out onto a cooling rack.
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Meanwhile, make the frosting. Make sure cream cheese and butter are both at room temperature. Beat until light and fluffy (10mins) then slowly sift in the icing sugar. Add the vanilla and beat for another 2 minutes.
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Slice each cooled cake into 2 even layers.
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On the first layer, spoon on some frosting and spread evenly. Repeat with the reamining layers. To get the semi-naked effect, smear some frosting around the surfaces of the cake and scrape the sides while turning with a straight-edged cake scraper.
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Place reaming frosting into a piping bag and pipe small drops around the top edge of the cake, continue towards the centre, making the drops bigger as you go.