Rudd opts for smooth handover

Julia Gillard. Photo / Getty Images

Our Australian correspondent Greg Ansley analyses the challenges faced by new Aussie Prime Minister Julia Gillard.

Julia Gillard this morning became Australia's first female Prime Minister, with former leader Kevin Rudd resigning at a Labor Caucus crisis meeting rather than face a ballot.

Gillard said she was very honoured to have been elected.

Treasurer Wayne Swan is the new Deputy Prime Minister.

Rudd's last-minute stepdown came despite a defiant stand last night, when he said he intended to fight for the job he had held since November 2007.

But faced with certain defeat in a ballot dominated by factional and right-wing votes that had swing behind Gillard, Rudd appears to have opted for a relatively smooth handover of power rather than inflict further political bloodshed on a Government hammered by opinion polls and facing election for a second term.

Rudd, the first Australian Prime Minister to be ousted in a first term, was felled by anger within the Party at his management style and a collapse in popular support following his shelving of a greenhouse emissions trading scheme, the recent conflict over a proposed super-profits tax on miners and other policy backflips and bungles.

Rudd did not contest the leadership at a meeting that was described as "very orderly", in which the former Prime Minister, Gillard and Swan had outlined their positions in "gracious" addresses.

Gillard now faces a huge task in pulling the Government back together, stifling lingering divisions and resentments to focus on a campaign against an Opposition that under Leader Tony Abbott has gained new strength and has been leading Labor in opinion polling.

Gillard will also have to rapidly review policy and cement a new approach for the Government.

She will have to work carefully to attach unpopular policies to Rudd's management, without allowing wider blame to settle on a Government in which she played a central role and whose approach she supported.

Among the most sensitive issues she will need to address are climate change and a greenhouse emissions trading scheme, the mining super-profits tax, and asylum seekers.

A number of decisions could also affect the strategy of Swan's May budget

Rudd's defeat further means Australia's leader will not be attending the G20 Summit, and effectively cancels the transtasman prime ministerial meeting scheduled for next week in New Zealand.