The long answer is I will explain why below.
Populism is Popular and Electable.
Left Wing Populism and Populism in General are currently on the rise throughout the world. In some counties such as Greece they even win elections outright (Syriza) and in others such as Spain, they participate in government in coalition with traditional left wing (Podemos).
They are popular in Australia as well. Pretty much every reasonably successful crossbench 3rd party is populist in one way or another. The Greens promise to boost to all social security payments and increase government expenditure in general. Nick Zenophon Team and later Center Alliance promise to revive local manufacturing, One Nation too advocates to increased spending, reviving manufacturing but also limit immigration to reduce competition on labor market. Even right-wing spoiler parties such as Palmer's United or Jaquie Lambie Network vaguely promise improvement of living conditions.
In total populism, mostly left-wing populism, now readily amounts to around 20% of the electoral vote. Combine that with Labor own 30% and you have guaranteed electability for a foreseeable future.
Right wing press does attack populism because they understand its danger to their electoral prospects. Murdoch press routinely mislabels One Nation as far right despite them being mostly economically left-wing.
However, populism is here to stay. The reason is changing socio-economic conditions.
Socio-Economic Conditions
Labor and Labor like parties rose to power and electability when working class (employee class) became a majority among the population. This was preceded by establishment of large factories and other large organization that employed a lot of people. Before that employees were not a majority in society and working class was not the base of political power. Before 19th century people used to work differently, it was more entrepreneurial and independent time.
Throughout 20th century large organizations dominated the economy and with them working class, trade unions and Labor Party were powerful and electable without any special effort on their part.
However, with advance in automation that started to change. Factories close and organizations employ less and less people. Progressively shrinking the working class and with them trade unions and Labour Party.
That does not affect only working class, the vaunted middle class shrinks just as much if not more so. Parties that used to represent middle class have long gone to make way for left wing populism instead.
However, all these people who lost jobs or job prospects due to socio-economic change do not become right wing voters. Far from it. Instead, they become even more left-wing than working class, a new left if you like.
New left is not the same as old far left. That is why new parties such as Podemos and Syriza win governments and traditional far left communists stagnate as before.
The reason for that is that traditional far left is falling behind is because all forms of socialism, democratic or not, fundamentally requires its supporters to be some kind of employees. It has no relevance or benefit for people who are not employees, for example those who are unemployed.
New Class
All these unemployed, underemployed, seasonal workers, day workers, informal workers, hustling, gig-economy and so on people together form a new socio-economic class. You can call them underclass as they are economically worse off than working class. Marx used to call them lumpen proletariat in contrast to working class (simple) proletariat. More modern and less offensive term is precariat, that emphasizes precarity of their economic prospects and future.
Unlike working class that have strong connection with their place of employment and each other, precariat is isolated and disconnected from each other. Different members of precariat experience vastly different economic, social and living conditions. The only thing that unites them is that they are all poor and struggle to meet ends meet on day-to-day basis.
Because of the above they cannot readily benefit from any structural economic change. Therefore, the only policy that can appeal is to give them money and things directly. Simple and plain free stuff. Hence why majority of them tend to support various far left or left-wing populist parties. It's not traditional socialism or even democratic socialism but rather extreme social-democracy and welfarism.
Precariat is Possibly Unfortunate Future
Because of current socio-economic conditions and development trends precariat will keep getting bigger and bigger. Simultaneously Labor's working class will keep getting smaller and smaller.
Parties that will manage to win this class over will end up shaping the politics of the 21st century.
That is not because its good or ethical, that is just economic reality.
The Greens, One Nation, Centre Alliance, Palmer's United and most of 3rd parties currently in Austria are trying to win precariat over with their populist policies. Even some parties connected with right wing tories are trying to get some of the precariat to vote for them.
However fundamentally precariat and tories could not be any more different. There is huge animosity from right wing towards so called dole bludger, typical representative of the precariat.
That puts Labor in a good position to win precariat over, but currently Labor does nothing to appeal to this ever-growing demographic.
How Labor Can Appeal to Precariat
While idea of winning educated well-off middle class might appeal to many in Labor much more than dealing with unwashed precariat, however for better or worse the future will be with precariat.
To win precariat Labor will have to branch out and embrace left wing populism or promising free stuff and money for nothing.
For decades already tories kept accusing Labor of pondering to dole bludgers, it's time to actually start doing that. Work ethics and such might get in the way of such approach, economic prospects of precariat are too precarious to care over something like that.
If the core of Labor is against such measures, then Labor can simply sponsor a loosely affiliated sister party. Right wing was doing it almost since the inception of the federation. Their Coalition consists of real tory party, called Nationals and its centrist-populist appanage designed to leach vote from other classes, called Liberals. Liberals have long outgrown their partner party in size but continues to be connected to it. National Party politicians continue to control important portfolios whenever Coalition is in power.
Labor too can set up something like Welfare Party and begin competing for precariat vote with Greens and others. Alternative names can be Radical Party or even Tenants Party. Together these new parties and Labour can govern jointly just like Coalition does. The left-wing union can be called Alliance to avoid confusion with right wing Coalition, either in advance or only after they take power.
Conclusion
For good or for bad Precariat is here to stay. Parties could either win this new and growing social class or be left behind like the UK's original Liberals who keep languishing as LibDems since the end of WWI.
Fundamentally if Liberals is the party for those who are somewhat well off, then their opposite should be the party of the poor. The new major left-wing party would be party of the poor. It can be Labor, but it can also be someone else. Its not too late for Labor to try winning the precariat.
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