The above is on the Department of Immigration and Multicultural Affairs website, and is a fair summary of the facts as I have observed them growing up in Sutherland Shire, and then later in much more diverse Wollongong, and later again as they became part of my life both personally and professionally, as the partner of a person from Mainland China and as an ESL and ELICOS teacher.
There is a myth that it is all a left-wing plot, but in fact the evolving policy was, perhaps until quite recently (having been tweaked or undermined since 1996), bipartisan. The word was first used in Whitlam’s time, but the most significant developments happened under Malcolm Fraser. One was the arrival of the Vietnamese refugees in significant numbers. Curiously, the hard Left opposed that on the grounds that Fraser, they thought, was stacking the place with anti-Communists, not to mention lingering Yellow Peril thinking, a legacy of both sides of politics in Australia. Pauline Hanson later quite correctly remembered Arthur Calwell’s famous “Two Wongs don’t make a White” crack.
As the site above says, “1978 – the first official national multicultural policies were implemented by the Fraser Government, in accord with recommendations of the Galbally Report in the context of government programs and services for migrants.”