Federal Labor faces a profound identity crisis and the party’s leadership — and most of all Julia Gillard — must put together a coherent vision for her government and a strategy for achieving it.

Yesterday’s Essential Report was awful for Labor, and not just for the unsubtle symbolism of Labor falling behind on the 2PP vote for the first time.

Primary

Labor and Coalition Primary Vote 2009-now

Labor’s primary vote has been in decline since the end of 2009. Kevin Rudd hit bottom in June this year at 35%, began pulling back, before being knocked off. Julia Gillard provided a temporary boost, but even in her honeymoon as new Prime Minister she never threatened 45%. Now it’s back below 40%.

More damaging were the data on perceptions of which party was best at handling issues. Labor really only had a substantial lead on one issue: improving wages for low-income earners, where it led the Coalition by 14 points. It led on the age pension by 4 points. It was about even or trailed on everything else — unemployment, housing affordability, prices, government debt (where it trailed 27 points), regulation of banks and large corporations, jobs going overseas. It even trailed on the Coalition on superannuation, 18%-27%, despite the Coalition having a super policy that not even the retail super industry supported.

It’s one thing for Labor to trail on government debt, or taxation. But for Labor to trail the Coalition on core party issues such as superannuation and housing affordability reflects serious damage to the Labor brand. If voters don’t regard it as capable of handling even its own key issues as well as the Coalition, they’re not going to vote for its candidates.

Labor has a problem that the Liberals simply don’t have: what does it uniquely stand for? As a party of the Left, Labor has faced this problem since the Cold War came to an end and the Washington Consensus on economic management was established, but Hawke and Keating’s deft embrace of the Consensus ahead of the Coalition staved off the issue for a political generation. Now, however, it’s more acute than ever.

The Liberals are associated by voters with some basic principles. They balance budgets. They preside over strong economies. They keep taxes low. They beat up on asylum seekers. The reality may be at odds with the image, but that doesn’t change the association in voters’ minds. Apart from IR, Labor seems adrift when it comes to basic principles. It’s a problem akin to the one the Nationals, another party traditionally supportive of state intervention and a regulated economy.

Throughout their time in office, when their proximity to the Liberals raised questions about their identity and what they really stood for, sufficient to create room for a populist revolt in the regions. Indeed, given just on half of voters believe the Labor and Liberal parties are becoming more alike, it’s a problem that will only get worse for Labor. If Labor is just about economic reform and managerial competence, then voters will gravitate toward the Coalition, regardless of how competent and reformist the latter are, particularly given the relentless partisanship of some News Ltd outlets in generating myths about Labor incompetence.

The Liberals have what might be called brand strength not just because they’re on the right side of history on economic policy, but also because of John Howard. Howard might have backflipped on key issues such as Medicare and immigration over the years but his sheer longevity meant that voters instinctively knew where he was coming from. Labor drew similar strength from Hawke and Keating.

For all that the Labor Party needs to define itself better, its leader is critical to the process of assuring voters about where a Labor government will take the country. Elected prime ministers have a direct relationship with voters, apart from that mediated by their parties. And part of that relationship is giving voters a sense of what goals the prime minister has, and how he or she wants to achieve them.

Hawke, Keating and Howard had that. Rudd began with that, but his mixed messages on asylum seekers and his retreat on the CPRS confused voters. Julia Gillard, who began her prime ministership with a huge backdown on the RSPT and promptly confused things further with a citizens’ assembly on climate change and a return to offshore processing of asylum seekers, has never had it.

We know the prime minister is passionate about education (then again so, too, was Kim Beazley, who wanted to be known as “the education prime minister”). We know she wants to “reform”, although for what end isn’t clear. But where’s the framework that incorporates the economy, social policy and foreign policy? What are the pillars of Labor policy that guide it and will never be retreated from? Even Rudd’s effort at a long-term agenda early this year, around productivity and health reform to address an ageing population, has disappeared off the radar.

Given the electoral cycle, Labor has got time to get its act together, and it is assisted by the fact that it is up against an inept Opposition (think of what sort of majority prime minister Costello would have racked up if he’d bothered to stick around). But if left unaddressed, this identity crisis will keep driving Labor’s primary vote lower and lower until it hits bedrock.