Three political parties dominate the center of the Australian political spectrum: the Liberal Party (LP), nominally representing urban business-related groups; the Nationals, nominally representing rural interests; and the Australian Labor Party (ALP), nominally representing the trade unions and liberal groups. Although embracing some leftists, the ALP traditionally has been moderately socialist in its policies and approaches to social issues. All political groups are tied by tradition to domestic welfare policies that have kept Australia in the forefront of societies offering extensive social welfare programs. Australia's social welfare safety net has been reduced in recent years, however, in response to budgetary pressures and a changing political outlook. There is strong bipartisan sentiment on many international issues, including Australia's commitment to its alliance with the United States.

The Liberal Party/Nationals coalition came to power in the March 1996 election, ending 13 years of ALP government and electing John Howard Prime Minister. Re-elected in October 1998 and again in November 2001, the coalition now holds 82 seats (69 Liberal/13 National) in the House of Representatives, against 64 for the ALP, 1 for the Greens, and 3 independents. In the Senate, the Liberal/National coalition holds 35 seats, against 28 for the ALP, 7 for the Australian Democrats, 2 for the Greens, 1 for One Nation, 1 for the Australian Progressive Alliance and 2 independents. Lacking a majority in the Senate, the Liberal/National coalition has relied on alliances with the smaller parties and independents to enact legislation.

Howard's conservative coalition has moved quickly to reduce Australia's government deficit and the influence of organized labor, placing more emphasis on workplace-based collective bargaining for wages. The Howard government also has accelerated the pace of privatization, beginning with the government-owned telecommunications corporation. The Howard government has continued the foreign policy of its predecessors, based on relations with four key countries: the United States, Japan, China, and Indonesia. The Howard government strongly supports U.S. engagement in the Asia-Pacific region. National elections will likely take place in late 2004 or early 2005.