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Using a ‘most-similar-systems’ design, several major theories of welfare state development are shown to have some weaknesses in comparing the Australian and Canadian welfare states during the Golden Age. I offer instead a party competition theory, with the degree of party system polarisation as a key variable. Located in a highly polarised party system, the Australian Liberals adopted a directional social policy strategy and further shifted the Australian welfare state in favour of the middle class. Located in a less polarised party system, the Canadian Liberals adopted a more proximity-based brokerage strategy of social policy and co-opted the left's popular social policies. [ABSTRACT FROM AUTHOR]