Leadership challenge is back on the agenda

CONCERNS about Julia Gillard's handling of the Peter Slipper and Craig Thomson scandals have refreshed leadership speculation as Labor MPs fear a massive loss of seats at the next election.

Some MPs who voted for the Prime Minister in the February leadership ballot say they will not vote for her again in any future ballot.

"I think it's fair to say there is increasing concern and MPs are jittery about losing their seats. This is leading to renewed speculation about the leadership," a senior NSW Labor source told The Australian.

MPs suggest the NSW Right faction - comprising the largest group of votes in the caucus - is "in a state of flux" and cannot be counted on to provide majority support for Gillard.

While the NSW Right doesn't typically vote uniformly in leadership spills, a majority of its MPs voted for Gillard over Kevin Rudd, and the faction is often pivotal in leadership elections.

Sources say there is "not an organised shift" away from Gillard, but a growing number of NSW Right MPs are now likely to support an alternative candidate if leadership matters again come to a head.

"NSW MPs are looking at the political situation and are worried about what it means for our seats," a source said.

"They are all a bit scared, and when they are scared, anything can happen."

The MPs are highly critical of the handling of the Slipper and Thomson scandals and the Prime Minister's political judgment. They are also concerned about the government supporting the embattled MPs too strongly.

Gillard's press conference yesterday was partly in response to discontent in Labor ranks.

MPs are also concerned about the government's inability to sustain a focus on positive policies such as the aged-care overhaul and land attacks on Tony Abbott.

This week's Newspoll has MPs very nervous. Those who are aligned to different factions in other states are also reconsidering their support for Gillard.

Although a leadership putsch is not under way, Rudd's backers are assessing his support for a new leadership tilt.

And Labor MPs are also considering other leadership candidates, such as Workplace Relations and Financial Services Minister Bill Shorten, who would be the frontrunner.