In this chapter, Diamond is arguing that the Europeans were able to dominate the Australians because Europe (and Eurasia in general) was able to create large societies based on food production. Meanwhile, Australians were not able to produce food on any large scale.
Because the Australians were not able to produce food, they had to remain as hunter-gatherers. This meant that they could not form large, sedentary populations that could eventually create technology. Because they had no technology, they could easily be dominated by the Europeans and their technology.
This is consistent with the main thrust of Diamond's whole book. He is arguing that places (like Australia) got dominated because of their lack of technology. The lack of technology generally stemmed from geographic disadvantages that made food production difficult.