Reading the comments thread, I notice a few themes that seemed familiar, and checking back I found this post from 2004, which seemed worth reprinting
Given that Labor obviously has to do something more than wait for the housing bubble to burst, one simple (but not easy!) organisational step would be to abolish factions. That is, membership of any organised factional grouping ought to be treated like membership of a rival political party, as grounds for automatic expulsion. Of course, it would be impossible to prevent informal or secret factions from operating, as they do in all parties. But, to my knowledge, the only major political party anywhere in the world with a faction system comparable to Labor’s is the notoriously corrupt Liberal Democratic Party in Japan, and even here PM Koizumi is largely independent of the factions.
There was a time (from the 1950s split to sometime in the 1980s) when the factional groupings corresponded to ideological divisions. But that has long since ceased to be true. It’s probably true that the average member of the Left faction is a little more likely to favor a ‘progressive’ line on social issues than the average member of the Right and Centre, but that’s about the strength of it. Each of the major factions is subdivided into smaller groups, often little more than extended families, with their retainers and servants.
Nowadays, the factions exist because they exist. No-one is willing to bell the cat. However, this is the kind of thing Latham could take on, and perhaps even win. It would certainly be more in his line than Simon Crean’s lame achievement of changing the union voting ratio from 60 to 50 per cent[1].
fn1. While I’m dreaming, I’d like an end to the formal link between the unions and the ALP. And a pony.
John Quiggin 
What I said in 2004. I am also reminded of the misuse of the ban on factions by communist parties to suppress dissent and victimise dissidents.
A somewhat lighthearted insight into how this works was provided by Frank Hardy in But The Dead Are Many, when one of his Eurocommmunist anti-heroes and one of his Stalinist villains are having a well-lubricated argument about the internal politics of the Communist Party of Australia.
Eurocommunist: (laughing) “You better watch out. I might organise a vote against you in the Congress ballot for the Central Committee.”
Stalinist: “That’d be your rotten form – an organiser of factions!”
Eurocommunist: “Comrade, your side’s going to get done at Congress. Then it’ll be your turn to be expelled for factional activity. Ha ha ha!”
[Not an exact quote, but close enough.]
observa said this on the previous thread something which I think is the key to understanding Federal Labour’s problems.
“I know it might seem a silly question but why do the factions work so well at State level and so poorly at Federal level?”
Factions per se are the not problem. The state labour parties have them and do very well.
Labour’s real problem at the federal level and the explaination for its success at the state level was pointed out by Latham in the Latham Diaries.
I am summarising, but basically he said that factionalism worked great at the state level because there were only two or three factions in each state. This is completely workable and perhaps even superior to the less factionalised state Liberal parties.
The problem is that that those state Labour factions carry through to the Federal level. So in the Federal Labour party there are not just two or three factions, but two or three factions from each state. This means that in practice there are actually more like twenty factions in the Federal labour party some consisting of just three members of parliament. This is just crazy and makes it impossible for a leader to have real authority.
That leaves the question of why the factions are based in the states, rather being replaced by a super factions at the federal level. This is is that the power of the labour party is concentrated in the state capitals, with the Federal labour party being relatively powerless.
Did anyone else hear the Crean interview (I think this is the right link) this morning on AM? If Beazley is still leader, all the government has to do is put that to music and keep playing it until the next election. They could even go in with a platform of flat taxes, full IR reform, and kill all the baby seals and they would still win.
Priceless.