For political historians, the two years preceding the 2013 election will be notable for the ALP’s extraordinarily audacious attempt to steal the Liberal Party’s lunch.

The party of the blue-collar “worker”, recast in the late 20th century as the party of the “employee” more generally, is attempting to become the party of the self-employed and the small employer.

The Coalition is aghast — in recent months Labor has announced SME-friendly policies such as its “instant asset write-offs”, has appointed Brendan O’Connor as minister for small business, elevated his portfolio to cabinet, and announced the creation of a Small Business Commissioner.

Labor’s sudden love of small business will seem, to many, about as silly as the thought of Pauline Hanson launching a multiculturalism policy at a world music festival.

Culture shocks aside, what is abundantly clear in talking to O’Connor is that this radical redefinition of Labor’s constituency is overdue and absolutely inevitable — the old Labor constituency is evaporating and if Australia is to have two dominant parties facing off across the parliamentary chambers, they must both put SME and self-employed voters at the centre of their policymaking.

Estimates of the total number of SME-owning, SME-employed, and self-employed voters in Australia vary according to one’s definition of “small”, but all estimates clearly identify a simple fact — small businesses are where most Australians go to work every day.

Ken Phillips, executive director of the Independent Contractors Association, puts the combined number at about 8 million, in a workforce of 11.5 million.

That’s roughly a million self-employed individuals, plus a million small business owners and their 6 million employees. The remainder of the workforce is made up of about 1.7 million in the public sector and 1.7 million employed by “big” business.

O’Connor says Australia’s workforce will continue to “atomise” — increasing numbers of very small businesses and independent contractors, many of them contracting to the larger organisations. Big business and government will continue to outsource as much as they can to SME workers.

So far, so good. Labor is not arguing with the shape of the future workforce. But where O’Connor and the Coalition (and Phillips) part ways is over the role of government in the lives of those 8 million workers.

The labour movement’s industrial wing has been losing its grip on the workforce for two decades — about 15% of private sector workers are union members — and the union movement and ALP are struggling to find ways to represent workers who don’t necessarily want “representation”.

O’Connor is optimistic on this point — he cites the Transport Workers Union, which has for years has signed up thousands of owner-drivers. With suitable “innovation”, says O’Connor, the unions can find ways to adapt and represent independent contractors and SME owners doing business with large corporate or government entities.

“Optimistic” is something of an understatement. That’s a tectonic shift in Labor thinking — it is re-defining itself as the party that organises collective action on behalf of small business owners, to keep the large business owners honest. “Epic”, “courageous” or “desperate” might also describe this shift. And O’Connor is implying that unions will be able to adapt to do the job of Phillip’s own organisation — the Independent Contractors Association (let battle begin!).

There is much debate to be had about the individual policies Labor is using to try to win SME hearts and minds, but the juiciest morsel offered ahead of the 2013 election is the “instant asset write-offs” that allow small businesses to bring forward a four-year depreciation schedule and write-off 100% of capital items costing up to $6500 — an unlimited number of such items. O’Connor explains in today’s interview why that figure was chosen.

This kind of policy leaves shadow small business minister Bruce Billson hopping mad — he reels off a long list of ways in which he thinks Labor is hampering SMEs, starting with the cost burden of the carbon tax and ending in Labor’s failure to live up to a “one in, one out” approach to regulation. Billson says for every “one out”, Labor has brought “205 in”.

Whatever side of politics you’re on, listen carefully to what O’Connor says in today’s interview. It is nothing short of a rewriting of Labor’s and the unions’ future in Australia. And those tempted to dismiss the push as “cynical”, “desperate” and “disingenuous”, should reflect on what a wildly diverse political audience exists in the SME space.

Six of those eight million workers are still employees. Of the one million independent contractors, many are savvy, educated business people able to protect their own rights when dealing with larger firms — and many are not. And the one million owners of SMEs, though most likely to be long-term conservative voters, may well respond at the ballot box to “instant” goodies like the asset write-off.

Labor’s concerted push into Coalition territory should not be underestimated.

*This article was first published at Business Spectator