Within a year after the first Federal election the Labor Party had settled in to national politics as an equal partner with the two fiscal parties. The game of party politics seemed the same as before Federation, with no party capable of winning an absolute majority of parliamentary seats, but there was a sense in which the smallest party was now determining the agenda of national politics, even on the choice between free trade and protection, but more so on the issues that had been dominant in the 1890s industrial relations, votes for women, safeguards for living standards, and immigration. Australia was a social laboratory, trying to achieve by measured legislation what Europe had failed to achieve by revolution.
At the second federal election in December 1903 the Labor Party improved on its first performance, winning 23 of the 75 House of Representatives seats. Its parliamentary performance over the previous couple of years had established that, although it would usually support Protectionist administrations, it had a clear identity of its own. Leader Chris Watson was insistent that, even though the major issues in the election were related to the fiscal question, and he usually preferred protectionist policies to free trade, Labor was not tied to either of the fiscal parties. Indeed, Labor (31%) gained a greater share of the vote than the Protectionists (30%), although not electing as many MPs.
The 1903 election saw women voting for the first time in a federal election. All parties recognised that they would need to court the female vote with suitable policies. Initially, it seemed that the conservative parties had a greater appeal to women mainly because of their association with temperance and 'wowser' policies at a State level but the Labor Party was more successful than the other parties at this stage in mobilising local women's electoral committees. Women were not yet allowed to stand as candidates.
The most important consequence of the election was that control of the House was now uncomfortably contested by three almost equally matched parties, so that a period of political instability was guaranteed. The Protectionists, led by Alfred Deakin, won 27 seats, while George Reid's Free Traders won 25. The Labor Party maintained its support for Deakin, who continued as Prime Minister, but there was no promise of continued support, and Labor clearly wanted delivery of key elements of its program, especially the introduction of a viable system of industrial arbitration. One of the parliamentary options for Labor was being closed off as Reid moved to define his party as 'anti-socialist' and hostile to most of Labor's program. What could Labor do if Deakin failed to deliver?