In April 1904, when Chris Watson formed the first Federal Labor government, Dawson was given the portfolio of Minister for Defence in light of his prominent status as a former Premier. As Minister for Defence, he clashed with Edward Hutton, the aristocratic English General Officer Commanding the Australian Military Forces, who had resisted being answerable to the executive, and had been viewed as disrespectful by previous defence ministers. Dawson proposed a military restructure which eliminated Hutton's position, which was adopted by his successor after the ousting of the Watson government, resulting in Hutton's resignation and return to England. Dawson reportedly stated that the "most satisfying facet" of his stint as minister had been that he had "pulled down from his pedestal the biggest bounder that had ever commanded the forces in Australia."