The White Australia Policy was introduced as part of Australia's immigration policy at Federation in 1901, when all the states joined together and a federal government was formed in Canberra.
The White Australia Policy was a result of Australia's xenophobic outlook towards Asia, as well as our fear of Japan and the 'Yellow Peril'.
At the time, Australians did not think of ourselves as 'Australians'. We thought of ourselves as British citizens and we wanted to protected the British identity. Of course we chose to ignore the fact that the British empire was a multinational Empire, made up of Indians, Chinese in Hong Kong, Africans in South Africa. We also chose to ignore the fact that the Indigenous Aborigines were not white. It was total glaring hypocrisy.
At home, Australian unions demanded that the government protect jobs. The unions played on fears that cheap labour, coming from China such as during the Gold Rush, would come to Australia and take jobs off Australians - and undermine our British idenity.