During the late 1880s and early 1890s, Australia's economy worsened, leading to reduced funding for the colonial armies and to the possibility of internal unrest. In 1890, during the Great Maritime Strike, the Victorian police expected rioting on a scale beyond their control. Six hundred troops including 200 from the Victorian Mounted Rifles were called out, and their presence in Victoria Barracks did much to dampen the threat.

In the following year, the Queensland shearers withheld their labour when the pastoralists, refusing to recognise the Shearers' Union, began importing non-union labour from other colonies. The ensuing confrontation was deemed sufficiently serious to call out 1442 members of the Queensland Defence Force and send them to centres where the unionists were concentrated. By May 1891, the strike was virtually over, without the employers having conceded freedom of contract to the strikers. The troops received the thanks of the Queensland Parliament but earned the long held suspicion of several sections of the Australian community.

It is significant that the Defence Act of 1903 prevented the raising of regular infantry and, for the defence of Australia, fostered a citizen army which could not be used in industrial disputes or serve outside Australia. ²⁸