Australian Prime Minister Julia Gillard should sack her foreign minister, who she toppled to be premier in 2010, and end a bitter leadership crisis that threatens her minority government and is repelling voters, a senior minister said on Monday.

Foreign Minister Kevin Rudd's supporters have called on Gillard to hold a leadership ballot, believing only he can stem haemorrhaging voter support ahead of the next election due in 2013, but a move back to Rudd risks losing the backing of key independents who give the Labour government a one-seat majority.

Weeks of leadership instability, which became public at the weekend, now undermines Labour's chances of holding power in the state of Queensland at a March 24 poll -- the resource-rich state is also crucial for the national government's re-election.

If Rudd did again became prime minister, opinion polls show it would do little to save Labour, which would be thrown from office with a losing margin of up to 12 seats.

Former Labour party leader Simon Crean said Rudd should either challenge, give up his leadership hopes, or leave the ministry.

Clearly he's not playing as part of the team, Regional Affairs Minister Simon Crean told Australian radio. If he can't be part of the team, he should exit the team, or challenge.

Gillard toppled Rudd in a party-room coup in 2010 and went on to narrowly win an election and form a minority government.

Conservative opposition leader Tony Abbott has said if he wins government he will dump her major policies, such as a carbon price to combat climate change that is due to come into force on July 1, and a 30 percent profits-based tax on iron ore and coal-mining companies.

The resource tax, which is being watched closely by nations in South America and Africa, is a direct result of Gillard's leadership. She struck a deal with BHP Billiton, Rio Tinto and Xstrata in July 2010, after Rudd earlier failed to get miners to agree to a higher tax. Rudd also failed to get approval for a carbon price.


The leadership question erupted when Rudd told a late-night television interview on Saturday he had learned from the mistakes of his time as prime minister, signalling he would consult and delegate more if he returned to the job.

During his time as prime minister between November 2007 and June 2010, Rudd alienated members of his own party with his frantic work schedule and his refusal to delegate tasks or take advice from colleagues. He was also criticised by voters for failing to implement major policies.

There's little chance of any effective (voter) turnaround from here, but the question is whether Rudd can start the upswing, Australian National University analyst Norman Abjorensen said, adding Rudd could help save some Labour seats.

A direct Rudd challenge would be unlikely to succeed as he has only a fraction of the support he needs within the centre-left Labour Party, said party sources.

Rudd told reporters in Mexico, where he is attending a G20 foreign minister's meeting, that he was not contemplating a leadership challenge.

That is not in prospect because we have a prime minister, I am the foreign minister, Rudd said, adding he was disappointed with Crean's comments.

Senior Labour figures now want Gillard to bring on a leadership vote next week to resolve the matter and end Rudd's hopes of a return to the prime ministership.

On Monday, Gillard appeared to rule out a ballot.

I'm getting on with the job with the strong support of my colleagues, she told reporters in Canberra.

Former Queensland state Labour premier Petter Beattie said it was clear Rudd was running a leadership campaign and the issue should be dealt with quickly.

We all know that's what's going on. People aren't stupid, Beattie told Australian radio. It's time that there was a caucus meeting and the matter was dealt with once and for all.

(Additional reporting by Krista Hughes in Mexico City; Editing by Michael Perry and Paul Tait)