How is government policy shaped and developed by the Prime Minister and Cabinet?

Great question, Kathy!

To clarify, Cabinet is made up of the prime minister and top-level ministers. Cabinet is the main decision-making group of the Australian Government. A government policy is the plan of action the Government wants to take on an issue. The Cabinet decides on government policy and makes decisions about national issues, including which government bills – proposed laws – should be introduced in the Australian Parliament.

Government policy can be formed by Cabinet in a variety of ways:

• They consider what is happening in Australia and around the world – like economic changes, natural disasters, or health concerns – and plan how the government should respond.
• They pay attention to what the people in Australia are saying. A community, business or lobby group might give members of the Cabinet suggestions or feedback.
• They work with government departments. A government department may tell their minister about a problem that needs fixing. The minister may then ask for a bill to be written to fix the problem. The Cabinet can also direct a government department to investigate an issue and make recommendations to best address it.
• The government party (or coalition) will have established party values and principles. The prime minister and Cabinet will work to make sure their policies align with these values. 

The Cabinet discusses and debates proposed policies. They might negotiate and make changes to a proposal before agreeing on it. Once they agree, it becomes government policy.