Kevin Rudd's return as Labor leader has triggered the prospect of an August election, a wholesale clean-out of the cabinet and a dramatic rewrite of key policies, including the Gonski school reforms, the crackdown on 457 visas and the fixed carbon price.
After a dramatic day of political brinkmanship, Mr Rudd won back the leadership almost exactly three years after he was toppled as prime minister, securing 57 votes in the Labor caucus to Julia Gillard's 45.
Ms Gillard called the spill about 4.10pm (AEST) amid reports Labor MPs were circulating a petition seeking a special party meeting to discuss a leadership ballot. Ms Gillard, who in 2010 made history by becoming the nation's first female prime minister, will now retire at the election after setting as a condition of the ballot that the loser leave politics. Mr Rudd reversed his long-held pledge not to challenge, declaring Labor was "on course for a catastrophic defeat unless there is a change".
Mr Rudd, who vowed to unite the party and avoid retribution against his enemies inside the party, last night looked certain to be able to secure a commission from the Governor-General to become prime minister after being able to count on five crossbench MPs for confidence in the minority parliament.
Independent MPs Tony Windsor and Rob Oakeshott, who early yesterday announced their resignations from parliament at the next election, had signalled they would not necessarily support Labor if there was a change of party leadership.
But the Greens indicated they would back Labor ahead of Tony Abbott, with Queensland independent Bob Katter also pledging confidence. Former Labor MP Craig Thomson will also back the party, with fellow Queenslander Peter Slipper tipped by both sides of politics to support Mr Rudd. Last night Tasmanian independent Andrew Wilkie wrote to Mr Rudd saying he would support him for confidence motions.
Mr Rudd's victory immediately triggered a major shake-out of Labor's frontbench. Treasurer Wayne Swan quit as deputy prime minister and communications minister Stephen Conroy stood down as Labor's Senate leader. Trade minister Craig Emerson, a close supporter of Ms Gillard, announced he would leave parliament at the next election, along with school education minister Peter Garrett. Climate change minister Greg Combet and agriculture minister Joe Ludwig resigned from the frontbench. Finance Minister Penny Wong was last night appointed Labor Senate leader and Anthony Albanese beat Simon Crean in a race for the party's deputy leadership by 61 votes to 38.
While Ms Gillard's 15-year political career will end on the night of the election, Mr Rudd becomes only the fourth person to become prime minister of Australia more than once and the first since Robert Menzies's second period in office started in 1949.
Mr Rudd last night paid tribute to Ms Gillard and Mr Swan as he "resumed" the role of prime minister with "humility, with honour and with an important sense of energy and purpose". He described Ms Gillard as "a woman of extraordinary intelligence, of great strength and energy", and noted Mr Swan's role as treasurer during the global financial crisis.
Promising a better relationship with the business community and appealing to younger voters, Mr Rudd said the negative and destructive nature of federal politics had failed the nation and must stop. "I simply do not have it in my nature to stand idly by and allow an Abbott government to come to power in this country by default," he said. "I recognise that Mr Abbott is a man steeped in the power of negative politics and he is formidable at negative politics. But I see no evidence of a real positive plan for our country's future."
Ms Gillard last night congratulated Mr Rudd on his victory but noted division within the party, saying it had "not been an easy environment to work in". "Don't lack the guts, don't lack the fortitude, don't lack the resilience to go out there with our Labor agenda and to win this election," she said. "I know that it can be done."
Referring to the so-called gender wars, Ms Gillard said "the reaction to being the first female prime minister does not explain everything about my prime ministership nor does it explain nothing about my prime ministership". She said it was up to the nation "to think in a sophisticated way about those shades of grey" but believed it would be easier in the future for women who followed her path.
