I'm not the best person to answer your question - not being overly politically active - but I'll give it a go. The major difference appears to be in their supporter base. The Liberal Party tends to be the party of choice for the upper class, while, as the name suggests the Labor party is more for the workers (and has a strong relationship with the trade unions). Both are fairly conservative politically - it is difficult to distinguish between policies and they are always accusing each other of stealing ideas.

The Liberal Party governs in a coalition with the National Party (who supposedly represent the rural community). Apart from the 2 major parties, there are a few minor contenders, including the Australian Democrats (who lost all credibility when they did a deal with the Lib-Nat government that resulted in the introduction of a goods and services tax - GST), The Greens (who promote environmental causes) and the One Nation Party (which have thankfully died a natural death - a very radical, racist unpleasant group of people).

As to Peter Garrett, he has always seemed to be aligned with the policies of the Greens - anti-uranium mining, pro-land rights for Aboriginals, anti-US defense bases. However, I really do think that he intends to retain his views - air them within the Labor Party (agitate for change) but not openly disagree with Labor policy. Time will tell...