Some of the earliest pioneers of the federation movement, men such as Alfred Deakin, came under the influence of David Syme of The Age. Other influencers of federalism included Samuel Griffith who while initially was seen as a supporter of the labour movement became partisan against the Labour movement with his legal intervention in the 1891 Australian Shearers' strike. While all of these men were generally self-described "liberals" their understanding of liberalism differed substantially. Deakin in particular was considered a radical who was disliked by both the traditional conservative Tory of the city and the squatting class of Australia. The degree of progressive sentiments also varied from colony to colony: social liberals such as David Syme were prominent in Victoria while others were prominent in South Australia, for instance. At any rate, Australia's parliamentary institutions, especially at a national level, were brand-new, so it was difficult for anyone to be labelled "conservative" in a traditional sense. The two largest political parties, the Free Trade Party and the Protectionist Party, could both loosely be described as "liberal" in the terms of the time. They were moderates with a strong belief in parliamentary institutions, financially orthodox and attached to the British Empire, with a distaste for radicalism. The third major political force was the trade union movement represented by Australian Labor Party. The rise in popularity of the Labor party began to become the major pre-occupation of these two other parties.
In the early stages of the parliament, the Labor party engaged in a partnership with the more radical Protectionists, but Labor's wide-ranging policies for social reform met with only lukewarm support from most Protectionists. Fear of socialism became widespread among the ranks of the establishment, and as the question of tariffs was settled, there was increasing pressure on the non-Labor parliamentary forces to unite in opposition to Labor.
The result was the Fusion in 1909, composed of Joseph Cook's Anti-Socialist Party (formerly Free Trade Party), and conservative Protectionists. The Fusion soon began calling itself the Liberal Party, proclaiming its adherence to classical liberalism. After Deakin's departure, the fervent anti-socialist Joseph Cook became leader of the party and it became the dominant right-wing force in Australian politics.
The pattern of a non-Labor party defining itself as liberal rather than conservative and deriving support from a middle-class base continued to the formation of the present-day Liberal Party, founded in 1945 and led initially by Sir Robert Menzies. Malcolm Fraser, quoting from Menzies' memoir,
Afternoon Light, described the decision to call the party "Liberal" in these terms,
We chose the word 'Liberal' because we want to be a progressive party, in no way conservative, in no way reactionary.
However, previous Liberal Prime Minister, John Howard, is reported to have described himself the most conservative leader the Liberal Party had ever had.
The "wet" (moderate) and "dry" (conservative) wings of the Liberal party co-operated fairly harmoniously, but in the early 1970s as conservatives started to dominate in South Australia liberals led by Steele Hall broke off to form the Liberal Movement. In 1977, other dissident small-l liberal forces led by Don Chipp created the Australian Democrats.