Gillard becomes Australia's first female prime minister as tearful Rudd stands aside

• Peter Hartcher's video analysis
• Labor wastes a perfectly good PM
• Abbott has a tougher opponent
• From hero to zero

Julia Gillard wasted no time in making her mark after taking over as the nation's first woman Prime Minister from a teary Kevin Rudd today.

She was sworn in as Australia's 27th Prime Minister by the country's first female Governor-General, Quentin Bryce, at Government House in Canberra this afternoon.

Ms Gillard was greeted with a kiss by her partner Tim Mathieson as she entered the room for the swearing-in.

She then took her place at the House of Representatives despatch box as Prime Minister.

New Prime Minister Julia Gillard and her deputy, Wayne Swan, walk the corridors of Canberra.Credit: Andrew Meares

Ms Gillard said she had accepted her new role because she believed a good government was losing its way.

She said would immediately cancel the government's multi-million advertising war with the miners over the super profits tax.

Soon after, BHP announced it was suspending its advertising campaign against the tax and welcomed Ms Gillard's initiative.

She said she was "very honoured" to become Australia's first female prime minister after Kevin Rudd stood down at a caucus meeting this morning.

A smiling Kevin Rudd arrives for the spill vote.Credit: Andrew Meares

Ms Gillard, not Mr Rudd, will now decide when to lead her party into the next election.

She will have talks with Mr Rudd about his future but speculation is mounting the former leader will be given the job of foreign minister.

Against expectations Mr Rudd decided to stay in parliament and recontest his seat of Griffith at the next election.

Current foreign minister Stephen Smith could easily step into Ms Gillard’s portfolios of education and workplace relations - ministries he’s handled before - allowing Mr Rudd to indulge his passion for international affairs.

A lot of them [Labor MPs] are going to sell their souls [and] put the knife in the back of a Labor Prime Minister in his first term

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An emotional Mr Rudd addressed the media, saying he was proud of his achievements, but not of blubbing.

Opposition leader Tony Abbott said Labor might have a new leader, but its policies were the same.

Treasurer Wayne Swan was elected deputy leader unopposed.

Just a year ago, Mr Rudd rivalled Bob Hawke as Australia's most popular leader. But he now joins Mr Hawke as the only other Labor prime minister dumped by his party.

Mr Rudd had decided to fight to the death after refusing to step aside last night for Ms Gillard.

Ms Gillard, however, was believed to have had the numbers before going into this morning's ballot, which was not held. She also had the backing of the powerful Australian Workers Union.

A series of policy failures, poor polls and the decision to go to war with the mining industry have all contributed to Mr Rudd's plunging fortunes among his colleagues.

The Coalition feared a change to Ms Gillard. Although she bears responsibility for many of the government's poor decisions, including shelving the emissions trading scheme and the school buildings program, she will be harder to beat than Mr Rudd.

The push to oust Mr Rudd was driven by the Right factions in Victoria and South Australia.

The entire national Right, including the NSW Right and its kingmaker Mark Arbib, had last night swung behind Ms Gillard, as had the Victorian Left, led by Kim Carr, who installed Mr Rudd.

The hard Left was left doing the numbers for Mr Rudd.

After a three-hour crisis meeting in his office last night with Ms Gillard and the veteran fixer John Faulkner, Mr Rudd held a media conference and said he would fight.

"I was elected by the people of Australia as the Prime Minister of Australia," he said.

"I was elected to do a job and I intend doing that job."

But he had acknowledged that he was abandoned by most of the factional powerbrokers.

Mr Rudd had attempted to salvage votes by promising to bring a speedy conclusion to the mining tax saga and initiate a timetable to implement an emissions trading scheme.

After being pressured to take a hard line against asylum seekers, he baulked, saying he would not engage in a race to the right.

The push to oust Mr Rudd was led by the Victorian senator David Feeney, Victorian MP Bill Shorten and South Australian senator Don Farrell, all right-wing heavyweights.

Sources said they met Ms Gillard yesterday afternoon in an attempt to persuade her to stand.

She was reluctant.

But Agriculture Minister Tony Burke and Senator Arbib met Ms Gillard separately to urge her to move.

Senator Arbib and Ms Gillard were instrumental in forcing the government to abandon the emissions trading scheme, which was the catalyst for the government's slide in the polls.

The move against Mr Rudd was sparked by a report in yesterday's Herald that Mr Rudd had used his chief of staff, Alister Jordan, to sound out the backbench over the past month on the level of support for him. This followed a Herald/Nielsen poll which showed the government would lose if an election were held then.

But Mr Rudd's action was regarded as a sign that he did not trust the repeated assurances by Ms Gillard that she would not stand.

"It was offensive and disloyal," said a Gillard supporter.

- with AAP