The paper endeavours to offer an objective assessment of Australian response to managing cultural diversity within formal employment sector. First, the paper offers an overview of the historical and the socio-political contexts of cultural diversity in Australia, which is followed by a discussion of how diversity is tackled from legal and organisational perspectives. The discussion seeks to identify the broad features of what the paper terms as ‘Australian model of managing diversity’. The paper argues that the Australian model seeks to promote the business case of managing diversity, which is a response to (1) the demographic changes in the Australian population, and (2) the historical evolution of social policy from assimilation (White Australia Policy) to inclusion (multiculturalism). In practice however the model seems to be predominantly focused on gender and individuality, lacking adequate structures to manage ethnic/racial, religious and other cultural differences in the workplace.