This means that a party on the left will allocate it's first few preferences to other parties on the left and a party on the right will allocate it's first few preferences to other parties on the right, unless these parties are extremely radical in which case they usually fall to the bottom few preferences.
Senate representation is proportional so that in a simplified election of 5 seats 20% of the vote wins a seat. Proportional representation combined with preferential voting leads to outcomes where fringe senators are elected with less than 2% of the primary vote.
Australia is an effective two party state where elections are generally won by low margins. Control of each house, particularly the senate, often depends on pandering to the whims of fringe parties who hold the balance of power. This, combined with attempts to frame policy so as to draw fringe voters back to the two major parties, results in government policy which seems out of place in a modern democratic socialist nation.
This is one such policy.
Edit: It's worth mentioning that at present both sides of federal politics are chasing the so called "values voters" and are involved in a pissing match to prove who is the most Christian conservative.