Neither major party is an inspiration to the public at the moment judging by the personal popularity of the leaders of both Labor and Liberal.
Labor's situation however is far worse than that of the Coalition as despite a low personal approval for Tony Abbott, Labor trails the Coalition very badly in the polls.
Political partisanship aside, it is essential that Labor remain an effective fighting force in politics for the good of the country, but I fear that is slipping away from them with the result being a disproportinate amount of power being handed to the Greens inparticular.
As short term measures to right the Labor ship, I suggest the following as a starting point;
1) Change the leader.
The leader is the face of the party and it's policy failures. I'm not sure who would be best to lead, but one person who should not be elevated back to the leadership is Kevin Rudd.
2) Put carbon (dioxide) policy back in the hands of the people as promised at the last election.
The new leader does not need to renounce carbon pricing, but rather take it to an election. An election need not be called straight away, but rather, the new leader could seek that deep and lasting community consensus between now and the next election. This would also help put the Greens and independents back in their respective boxes and hence help Labor's perception as political leaders.
3) Retain the Mineral Resources Rent Tax in some form.
This seems to have broader public support than the carbon tax and was a policy Labor took to the last election. Proceed with this one, but look to overcome any inequities created by such a rushed agreement with only the three big miners. Also, look at how the MMRT and state royalties can be merged into a single tax on efficiency grounds.
4) Reduce the influence of Labor's power sharing partners.
If the Greens and Labor alligned independents are not happy with the above policy changes (and any others for that matter) such that they would withdraw support, call an election. Labor goes down, but then, so does the power these minor players have.
Would they ultimately choose an election now with the outcome a likely Coalition landslide over the above policy changes if push came to shove ?
With many other policy areas to consider, the above is only a start and it may not win them an election in 2 years time, but to me would be the best way for Labor to start to rebuild itself into an effective political force, challenge the opposition and perhaps bring itself back from the abyss.