Julia Gillard unveils new cabinet

Julia Gillard. Photo / Getty Images

Australian Prime Minister Julia Gillard says her new ministry delivers on a promise to establish a portfolio dedicated to regional Australia.

It will be headed by Simon Crean, previously responsible for education and workplace relations.

The announcement today comes four days after Labor secured the support of two country independents to form minority government in the first hung federal parliament in 70 years.

Earlier in the day a spokeswoman for Ms Gillard confirmed that Mr Rudd, a Mandarin speaking former diplomat who was Labor foreign affairs spokesman while in opposition, would take over from Stephen Smith who has held the job since Labor won the 2007 election.

Following his ousting as prime minister, Ms Gillard promised him a senior frontbench position with speculation covering foreign affairs plus some other possibilities.

Mr Smith will be Labor's third defence minister in less than three years.

In a surprise move, Penny Wong takes the finance portfolio left vacant by Lindsay Tanner when he retired from federal politics at the August 21 election.

Senator Wong had been keen to move from the climate change portfolio following her failure to have parliament's upper house approve Labor's carbon pollution reduction scheme.

Greg Combet becomes climate change minister, a step up from his assistant role to Senator Wong.

Craig Emerson, one of Labor's better media performers, also has been promoted to cabinet, taking over the trade portfolio for which Mr Smith had responsibility since June.

Former small business, competition policy and consumer affairs minister Craig Emerson will take over the trade portfolio from Simon Crean.

Peter Garrett retains his place in cabinet despite being responsible for the botched home insulation scheme, but he loses the environment portfolio to take responsibility for schools, early childhood and youth.

"This is a special new responsibility for him," Ms Gillard told reporters in Melbourne.

There are four new ministers: Bill Shorten (assistant treasurer and superannuation), Mark Butler (ageing), Jason Clare (defence procurement) and Gary Gray (special minister of state).

"Mr Shorten is a very talented member of Parliament," Ms Gillard said, adding he had done an outstanding job as parliament secretary for disabilities.

The previous ageing minister Justine Elliot has voluntarily stepped aside from her ministerial position to become parliamentary secretary for trade.

Ms Gillard said she had not spoken to the three country independents about the appointment of Mr Crean to the regional Australia portfolio.

Mark Arbib, one of the factional powerbrokers responsible for bringing down Mr Rudd, has not been rewarded with a cabinet position.

But Ms Gillard said he would be given "greatly increased responsibilities" for indigenous employment and development, social housing and sport.

Wayne Swan, as expected, remains treasurer.

Chris Bowen becomes the new immigration minister replacing Chris Evans, who moves to a jobs portfolio.

Mr Smith said he had worked very well with Mr Rudd when he was prime minister.

"You can never have a crack of light between a foreign minister and a prime minister and that has been the approach I have assiduously adopted whether my prime minister was Mr Rudd or my prime minister was Julia Gillard."

Mr Smith said he had talked to Mr Rudd in the caucus room last week.

"I was keen to make sure he was fit and well after his recent operation and he was keen to make sure I was in good spirits," Mr Smith said.

"We are professional colleagues and we wished each other well."

Mr Smith said that when Ms Gillard asked him which portfolio he wanted, he had told her: "I was very happy to continue with foreign affairs", but he accepted it was her decision to appoint Mr Rudd to that role.

"The prime minister asked me what I would like to do and I said defence," he said.

Mr Smith said he would work very hard to discharge what he considered to be a "heavy burden", being responsible for Australians serving and dying in dangerous conditions overseas.

He said he was looking forward to a forthcoming parliamentary debate on Afghanistan.

He said Australians would always ask questions about the value of the Afghanistan commitment when Australian soldiers continued to be killed there.

"But on a day like September 11, Australians will be reminded that there are terrible consequences for Australians if international terrorism is allowed to run free," he said.

Mr Smith said Australia had always made it clear it had an enduring commitment to Afghanistan.

- AAP