Welsh-born lawyer Julia Gillard became Australia's first woman Prime Minister yesterday after the once hugely popular Kevin Rudd fell to a party coup less than three years after taking office.

The tough, flame-haired Ms Gillard was elected unopposed in a shock Labor Party ballot called just hours earlier, saying she could not "sit idly by" as public and factional support swung dramatically away from the former leader.

"I asked my colleagues to make a leadership change because I believe that a good government was losing its way... and at risk at the next election," Ms Gillard said. "I was not going to sit idly by."

Ms Gillard, 48, pledged to seek a popular mandate within months, and set about reversing the issues that sank Mr Rudd by pursuing a dropped carbon trading scheme and urging mining chiefs to cancel a TV campaign against a planned new tax.

The plea drew immediate dividends as BHP Billiton, the world's biggest mining company, and Australia's top resources industry lobby group shelved their advertisements.

Yesterday's quickfire developments cemented a remarkable rise for the unmarried Ms Gillard, who battled through the party ranks, and faced sneers over her lack of children and strong Australian accent, to become Labour's leading light.

But analysts raised questions over the manner of her ascent, which came through shady backroom deals hatched by political power-brokers and ended in a hasty dismissal for Mr Rudd, elected by a landslide in 2007.

Rumblings of a leadership change surfaced only late on Wednesday, when Mr Rudd emerged from talks with Ms Gillard to announce the surprise parliamentary party vote yesterday.

Experts were stunned at the fall from grace of Mr Rudd, who plummeted from record support levels to become the first Australian Prime Minister deposed in office since Labour's Paul Keating unseated Bob Hawke in 1991.

The bookish, centre-left technocrat rode high in the polls after ousting conservative John Howard and only slumped in recent months after shelving the carbon trading scheme and suggesting the unpopular mining tax.

"The remarkable speed of this change is mind-blowing," said political commentator Elizabeth van Acker. "This time yesterday there was no public indication this would happen."

Mr Rudd's policy bumps and somewhat stiff persona gave rise to a public image of being long on rhetoric and short on real accomplishments, as well as something of a control freak.

An uncharacteristically emotional Mr Rudd, 52, repeatedly paused to choke back tears as he faced the press in Canberra flanked by his family.

"I was elected by the Australian people as Prime Minister of this country to bring back a fair go for all Australians, and I have given my absolute best to do that," Mr Rudd said.

"What I'm less proud of is the fact that I have now blubbered," he added.

Ms Gillard is now tasked with turning around the fortunes of a Labour Party which has been flirting dangerously with becoming the first government since World War II not to secure a second term.

"You've got a party that's clearly lost confidence in the direction that it's been pursuing, the leader that took them to the last election," said Rodney Smith, an election expert from the University of Sydney.

"That's got to raise serious questions about whether Labour should be elected next time around."

Ms Gillard, who is in a long-term relationship with hairdresser Tim Mathieson, said she would not move into The Lodge, the Prime Minister's residence, but would continue to divide her time between her Canberra flat and Melbourne home.

The straight-talking lawyer, known for her wit and savage put-downs, has forged a reputation as a formidable parliamentary performer since taking on the demanding employment and education portfolios under Mr Rudd.

Ms Gillard's deputy Prime Minister was named as Treasurer Wayne Swan, who is credited with easing Australia through the financial crisis without entering recession and will travel to this weekend's G20 summit in Canada.

The rapid developments even stunned Ms Gillard's family, who emigrated from Wales in 1966.

"I knew that she would be a performer as a participant in the arena, and that she would be formidable and that she would certainly rise," father John Gillard said.

"But I never thought she would rise to the position of Prime Minister. But there we are, that's what happened."

Factbox

Key events in ex-Australian PM Rudd's leadership.

Australia's 26th Prime Minister Kevin Rudd surged to record approval ratings during his two-and-a-half-year reign before coming unstuck with an unpopular mining tax and stalled climate reforms. The following is a timeline of key events under Mr Rudd's Labor Party leadership:

December 3, 2006: Mr Rudd wins leadership of the national Labour Party in a ballot, ousting Kim Beazley.

November 24, 2007: Queensland-born Mr Rudd wins national elections, beating leader John Howard by a landslide and bringing to an end more than 11 years of conservative rule. Julia Gillard is named as Australia's first female deputy Prime Minister.

December 3, 2007: Australia signs the UN's global pact to limit greenhouse gas emissions, the Kyoto Protocol.

February 14, 2008: In a moving speech to parliament, Mr Rudd apologises for past injustices to the country's indigenous people. The landmark historic event is watched on television screens around the country.

September 5, 2008: Australia appoints Quentin Bryce as Governor General, the first woman to take up the post of Queen's representative.

October 14, 2008: Mr Rudd unveils the first tranche of a massive economic stimulus package worth some $60 billion in a bid to counter a slowdown caused by the world financial crisis.

April 27, 2010: Mr Rudd, who previously had described climate change as "the great moral challenge of our generation" shelves plans to introduce a carbon trading scheme to cut greenhouse gas emissions.

May 2, 2010: The government announces plans for a 40 per cent tax on mining profits, which is strongly attacked by the industry and fails to garner popular support.

May 5, 2010: Polls show Mr Rudd's approval rating has plummeted to a record low, and Labour would lose an election to a resurgent conservative opposition led by Tony Abbott.

June 23, 2010: Mr Rudd says he has lost the support of factional leaders and announces a leadership ballot.

June 24, 2010: Julia Gillard stands unopposed to become national Labour Party leader and the country's first female Prime Minister.