There are a few reasons that the Australasian colonies decided to federate – and the emphasis will differ depending on which (historical) person you ask. If I may use a modern comparison, there a few reasons that Australia did not become a republic when the referendum was put to the people in 1999: there were various groups and people advocating the “Yes” or “No” positions, and each group/person did so for different reasons. Saying that it was simply that Australians didn’t want to become a republic is simplistic.

Similarly, we can not point to any single reason and say “That is why the colonies decided to federate!” There were many reasons and motives proposed by many people and organisations over a few decades, and they all contributed to the final outcome.

As early as 1857, a Select Committee in the recently formed colony of Victoria wrote:

Your Committe are unanimous in believing that the interest and honor of these growing States would be promoted by the establishment of a system of mutual action and co-operation among them. Their interest suffers, and must continue to suffer, while competing tariffs, naturalization laws, and land systems, rival schemes of immigration, and of ocean postage [...] exist; and the honor and importance which constitute so essential an element of national prosperity, and the absence of which invites aggression from foreign enemies, cannot in this generation belong to any single Colony of the Southern Group; but may, we are persuaded would, be speedily attained by an Australian Federation representing the entire.

[...] By becoming confederates so early in their career, the Australian Colonies would, we believe, immensely economize their strength and resources. [...] They would not only save time and money, but attain increased vigor and accuracy, by treating the larger questions of public policy at one time and place.

[Report from the Select Committee upon the Federal Union of the Australian Colonies, 1856-7]

Note the various reasons listed for federating: tariffs, citizenships, immigration, postage, defense, efficiency.

In 1870, Charles Gavan Duffy spoke in the Victorian Parliament about this previous Select Committee report. His main point was that there had been no action on this report for too long. In pushing for action, he said:

It may be said, no doubt, that England is mistress of the seas, and will be able to protect her commerce and ours. But France and America have been making enormous expenditure and immense exertions for years past to be in a position to compete for this supremacy. Even if it be admitted that England would be able to protect the great highway to Europe by the Cape, will she be able to guard the Northern Pacific, or to save the great Australian cities from fleets stationed at San Francisco or New Caledonia?

[...] it would put an end to what a Canadian statesman describes as “colonies cutting each others throats with razors called tariffs”. It would create between us an intercourse of mind. [...] It would result in the creation of a national spirit [...] And, finally, it would give Australia complete control of her own resources for the protection of her own interests.

Alfred Deakin, an eyewitness to, and key participant in, the process of federation, wrote in his ‘The Federal Story’ (based on notes he kept during the years that federation was discussed and progressed):

The Federal impulse of 1880 was in the first place a reaction from the ultra-Protectionist policy [of the Victorian colony] of 1878-9 some of whose imposts, and the Stock Tax in particular, being directly aimed at intercolonial imports, naturally provoked great bitterness on the border.

In this, he wasn’t far wrong. After the idea of federating had floated in the ether for years and decades, and an abortive start toward Fedaration was made in 1890, matters finally came to a head in 1893 when people around the Victoria-New South Wales border gathered in a meeting which later became known as “the Corowa Conference” to push for action on federation because they were sick and tired of paying customs every time they moved goods across the river.

Back to Deakin’s ‘Federal Story’:

Dread of German aggression in New Guinea and of a French annexation of the New Hebrides [was among] the chief operating causes of [the Intercolonial Convention of 1883].

Deakin himself said:

... that they [the Australasian Colonies] were asked [by the British government] to surrender the New Hebrides as of little commercial value and in the next breath were told that the French set the greatest store by them for commercial development. [The French’s] interest in Australasia were spoken of as large, while ours which were incomparably larger were brushed aside as of no account. [...] We were assured that our alarm as to French intentions was groundless but we should never forget that it was while relying on a similar assurance from the Colonial Office, our trust had been betrayed by a surrender of part of New Guinea to Germany.

So, intercolonial taxes and mutual defence were two of the main issues.

Henry Parkes, the so-called “Father of Federation” repeatedly stressed the issue of mutual defence, starting with his Tenterfield Oration:

The Imperial General who inspected the troops of the colony had recommended that the whole of the forces of Australia should be united into one army. It would be pleasing if they could rely on being safe without taking military precautions at all; but as this was impossible, they must take measure to defend themselves

The Australian Natives’ Association, a mutual society exclusively for Australian-born natives (of British descent, of course!), was strongly in favour of Federation. They were behind the previously mentioned the Corowa Conference. They also believed:

[...] the future well-being of Australia, its progress and prosperity, and the material wealth of the colonists themselves, depend on its being united.

[...] the Board of Directors [of the ANA] must organise a crusade throughout the length and breadth of the continent [...] The great body of native-born electors in the Riverina should be aroused to a sense of the possibilities that may follow their co-operating with brother Australians. [...] inasmuch as the Board considers the people of Australia, from the Gulf of Carpentaria to the Australian Bight, and from Perth to Port Jackson, want to be appealed to, they recommend the [ANA] Conference to instruct the incoming Board to open a vigorous campaign. The time is ripe for an appeal to the whole of Australia.

[Report of the ANA Conference at Warrnambool, Victoria in 1894]

But, regardless of the ANA’s call to co-operation and brotherhood, the main two reasons the Australian colonies federated were to remove intercolonial taxes and mutual defence.