Six fiscally conservative Labor MPs left the party to protest the Scullin government's financial policies during the Great Depression.

Led by Joseph Lyons, a former Premier of Tasmania, the defectors initially sat as independents, but then agreed to merge with the Nationalist Party and form a united opposition.

He led the UAP to a landslide victory at the 1931 federal election, where the party secured an outright majority in the House of Representatives and was able to form government in its own right.

In August 1941, Menzies was forced to resign as prime minister in favour of Arthur Fadden, the Country Party leader; he in turn survived only 40 days before losing a confidence motion and making way for a Labor government under John Curtin.

While Health Minister Frank Anstey supported Premier of New South Wales Jack Lang's bid to default on debt repayments, Lyons advocated orthodox fiscal management.

[13] Lyons and Fenton's opposition to the economic policies of the Scullin Labor government had attracted the support of a circle of socially prominent Melburnians known as "the Group" or "Group of Six", comprising stockbroker Staniforth Ricketson, insurance company president Charles Arthur Norris, metallurgist and businessman John Michael Higgins, writer Ambrose Pratt, state attorney-general Robert Menzies, and architect Kingsley Henderson.

Soon afterward, Lyons, Fenton and four other right-wing Labor MPs—Moses Gabb, Allan Guy, Charles McGrath and John Price—resigned from the ALP in protest of the Scullin government's economic policies.

Indeed, he had been chosen as the merged party's leader because he was thought to be more electorally appealing than the aloof Latham, and was thus better suited to win over traditional Labor supporters to the UAP.

In November 1931, Lang Labor dissidents broke with the Scullin government and joined with the UAP opposition to pass a no-confidence motion, forcing an early election.

The UAP initially hoped to renew the non-Labor Coalition with the Country Party of Earle Page after coming up four seats short of a majority in its own right.

A dramatic episode in Australian history followed Lyons' first electoral victory when NSW Premier Jack Lang refused to pay interest on overseas State debts.

In an effort to frustrate this move, Lang ordered State departments to pay all receipts directly to the Treasury instead of into Government bank accounts.

[19] On 7 April 1939, with the storm clouds of the Second World War gathering in Europe and the Pacific, Joseph Lyons became the first Prime Minister of Australia to die in office.

[20] The UAP's Deputy leader, Robert Menzies, had resigned in March, citing the coalition's failure to implement a plan for national insurance.

Troubled by Britain's failure to increase defences at Singapore, Menzies was cautious in committing troops to Europe, nevertheless in 1940–41, Australian forces played prominent roles in the fighting in the Mediterranean theatre.

[22] In January 1940, Menzies dispatched potential leadership rival Richard Casey to Washington as Australia's first "Minister to the United States".

Menzies banned the CPA after the fall of France in 1940, but by 1941 Stalin was forced to join the allied cause when Hitler reneged on the Pact and invaded the USSR.

[24] At the general election in September 1940, there was a large swing to Labor and the UAP-Country Party coalition lost its majority, continuing in office only because of the support of two independent MPs, Arthur Coles and Alexander Wilson.

[23] New Country Party leader Arthur Fadden became Treasurer and Menzies unhappily conceded to allow Earle Page back into his ministry.

In January 1941, Menzies flew to Britain to discuss the weakness of Singapore's defences and sat with Winston Churchill's British War Cabinet.

[19] He returned to Australia via Canada and the United States – addressing the Canadian parliament and lobbying President Roosevelt for more arms production.

[19] After four months, Menzies returned to Australia to face a lack of enthusiasm for his global travels and a war-time minority government under ever increasing strain.

With the threat of Japan imminent and with the Australian army suffering badly in the Greek and Crete campaigns, Menzies re-organised his ministry and announced multiple multi-party committees to advise on war and economic policy.

Unable to secure Curtin's support, and with an unworkable parliamentary majority, Menzies faced continuing problems with the administration of the war effort and the undermining of his leadership by members of his own coalition.

Australia marked two years of war on 7 September 1941 with a day of prayer, on which Prime Minister Fadden broadcast to the nation an exhortation to be united in the "supreme task of defeating the forces of evil in the world".

With the Pacific on the brink of war, Opposition leader John Curtin offered friendship and co-operation to Fadden, but refused to join in an all-party wartime national government.

[26] Under the prodding of Governor-General Lord Gowrie, who wanted to avoid calling an election given the dangerous international situation, Coles and Wilson threw their support to Labor.

Curtin proved a popular leader, rallying the nation in the face of the danger of invasion by the Japanese after Japan's entry into the war in December 1941.

UAP branches tended to become inactive between elections, and its politicians were seen as compromised by their reliance on large donations from business and financial organisations.

[...] To establish a new party under a new name, it is, I think, essential to recognise that the new groups and movements which sprang up in the six months before the election were all expressions of dissatisfaction with the existing set-up.