Key Labor figures have backed a call by Bill Shorten to allow non-union members to join the party and overhaul the way candidates are selected.
But the opposition leader is likely to face some resistance with union chiefs wary of the reform.
Labor achieved just under 22 per cent of the primary vote in Saturday’s WA Senate election re-run, was defeated at the 2013 federal election and has lost office in all but two states and territories since 2007.
Mr Shorten says the party needs to face up to some “hard truths”.
The Labor leader was set to deliver a speech in Melbourne on Monday outlining his reform plans, including allowing non-union members to join, but it was called off due to the death of his mother, Ann.
In part of that speech sent to media, Mr Shorten says: “We must make it clear that Labor is not for one group of Australians, or one sector of the economy, at the expense of others.
“We are for an economy where everyone prospers, a society where everyone benefits, where the fair go is for everyone.”
The party’s biggest branch, NSW, will seek support for the union rule change at its state conference in July and other state branches may follow.
NSW Labor secretary Jamie Clements said it would send a signal that Labor was open to members from all backgrounds.
“It’s a very big change – there’s a lot of history between unions and Labor,” Mr Clements told AAP on Monday.
The state conference will also complete reforms which began in July 2013 when then Labor leader Kevin Rudd ordered national intervention in the NSW branch, which had been rocked by allegations aired at anti-corruption hearings.
The NSW Labor state conference will be asked to endorse the final reform: giving rank-and-file members at least a 50 per cent say on the powerful administrative committee.
Mr Clements said he expected other branches to follow NSW’s lead and heed Mr Shorten’s call for reform.
“He has the respect of the union movement as someone who is genuine in his support and isn’t engaged in a union-bashing exercise.
“This is an exercise in making the Labor party more electable.”
ACTU assistant secretary Tim Lyons is among the critics of the union rule change.
“My personal view is that ALP members who are working should be union members,” he told AAP.
Labor frontbencher Jason Clare said the party should also allow more community preselections of candidates, which are to be used by the NSW branch ahead of the 2015 state election.
Coupled with the union rule change it would “help to reform the Labor party and help us to earn back the trust of the Australian people”, Mr Clare said.