In contrast to many locations in Asia, Australia is regarded as having a very low risk of political instability. Australia ranked fourth in the world for political stability in the IMD World Competitiveness Yearbook 2007 and was also assessed as having the seventh most transparent government policy among the 55 economies surveyed.

Australia is a constitutional democracy based on a federal division of powers. Significant government conventions have been adopted by Australia from the system of government developed in the United Kingdom (the Westminster system) at both the Commonwealth and State levels. This has provided for very stable government in Australia, with the opposition typically forming a 'shadow Cabinet' of members of Parliament who prepare themselves to take over the reins of government.

New South Wales is governed by a ministry headed by the Premier (as in all other States). The State Cabinet, chaired by the Premier, is the centre of political power in New South Wales. The legislative power of each of the States is defined by the Commonwealth and State constitutions, and includes education, roads, hospitals, police, public transport and overseeing local government.