I'm not sure what you are on about. Plain and simple, countries like Australia are throwing away the baby with the bathwater by basically giving up on decent crypto. They are making it easier for the likes of China to spy on them who can and will abuse any informational advantage they can get. This long term puts them at a disadvantage internationally. I doubt this is in any way intentional. That would be stupid.
The type of politics that drives this is older, technically challenged politicians (aka. idiots) responding to pressure from minority groups whining about pornography and other things they don't like. The priorities seem to be appeasing groups like that in order to secure the next election cycle. By essentially sacrificing security, which they clearly have a limited understanding off.
Never attribute to malice that which can be adequately explained by stupidity. Some countries don't get their priorities straight because they are being led by idiots. It's indeed a system failure. The solution is wielding a giant clue bat and causing relevant stakeholders (military, financial sector, etc.) to wake up and push back and doing something about it.
The reason cryptography is still legal in most civilized places is that we've had a few rounds of that over the past decades.