Foreign Minister Kevin Rudd resigned from his post Wednesday night, leading to a leadership battle in the Australian Labor Party. Rudd, who was ousted as prime minister by Julia Gillard in 2010, said he has lost her confidence.

Gillard set the formal leadership ballot for Monday at 10 a.m., which she announced in a press conference in Adelaide.

Rudd said in another press conference before he left Washington that he was shocked and disappointed with the tone of the vicious personal attacks on him, which he said have no place in Australian politics.

The prime minister said the 2010 election campaign was sabotaged by Rudd's camp which ran a long-running destabilisation campaign. She ended her press conference by castigating a "rude reporter."

Rudd's wife, Therese Rein, held her own press conference where she urged voters to get in touch with their local Labor MPs and senators to tell them who they want to lead the ALP.

"What ordinary people tell me is that they trust Kevin. They respect him, they know how hard he worked... they know he's committed, they know he's worked hard as foreign minister and tried to do the very best he could," Rein said.

In case she loses in the Monday leadership election, Gillard said she would not continue to contest the prime ministership and encouraged Rudd to make the same pledge. However, she expressed confidence that she will retain her post.

"I expect to receive the support of my colleagues.... If I do not receive the support of my colleagues I want to make it clear that I will go to the back bench and renounce any leadership ambitions," Gillard said.

"I anticipate that Kevin Rudd will be a contender in the leadership ballot and I ask him to give the same undertaking that he will go to the back bench and renounce leadership ambitions," she added.

Gillard said Australians are sick of the political infighting and want it to end. The prime minister acknowledged that Rudd was an excellent campaigner in 2007, but the government he led was paralysed by his chaotic and dysfunctional work patterns. Gillard accused her predecessor of being focused on the next news cycle and the next photo opportunity.

Simon Crean, whom Rudd accused of attacking him, which led to the current leadership battle, said the former prime minister was grandstanding by timing his resignation announcement, which was the middle of the night in Washington, with Australia's evening news.

"The caucus will decide, but not because Kevin's called it on. All he's done is to resign dramatically... and (he'll fly home) and make another dramatic statement on Sunday, while the party bleeds," Crean told Radio National.

Crean said he would be surprised if the former foreign minister would get 30 votes in Monday's leadership ballot.

Treasurer Wayne Swan backed Gillard and described Rudd's leadership as "dysfunctional decision making and a deeply demeaning attitude towards other people."

Swan acknowledged the significant achievements of the former prime minister, but pointed out that he has great weaknesses which the public has yet to see. He forecast that Gillard will win the Monday leadership ballot.

Greens leader Bob Brown shared the same sentiment, but said the party is willing to support either Gillard or Rudd although he pointed out that when the latter led the nation, the Greens had difficulty getting in touch with him.

Rudd's announcement made news not only in Australia, but globally as the terms Rudd and foreign ministers were in the top 10 search terms in social network Twitter.

Rudd's daughter, Jessica, and wife, Rein, tweeted their support for the newly resigned foreign minister.

Sydney Morning Herald political correspondent Philip Coorey noted the paradox of the two ALP leaders.

"Gillard is well-liked by the majority of her colleagues but disliked by the majority of the voters. Rudd is loathed, indeed hated, by the majority of his colleagues, but is vastly more popular than Gillard among the public."

"So rather than rely solely on direct lobbying of colleagues for support, Rudd has enlisted people power. Ultimately, every MP wants to keep their seat and Rudd knows the survival instinct eventually overrides personal loyalty," Coorey wrote.

Opposition leader Tony Abbott seized the ALP political leadership crisis to pitch for the Coalition, which he said is the only force that can provide the strong and stable government to address issues facing Australia.

"Kevin Rudd has confirmed two things - that the faceless men are running the Labor Party and that the instability at the top of this government is damaging our country," Abbott said in a statement.

"Kevin Rudd's statement tonight confirms that this government is unworthy to continue in office," he added.

Ric Spooner, chief market analyst of CMC Markets, said the news of Rudd's challenge to Gillard's leadership is unlikely to influence investor sentiment on Thursday.

"At this early stage, investors have no clarity as to the probability of success should a challenge by Rudd be confirmed. In any even investor have no guidance on whether a change of leadership would result in any material change to the government's economic policies," Spooner wrote.

"The possibility that the agreement between and the government and independent parliamentarians may be up for renegotiation or that a successful leadership challenge may be the catalyst for an early election could however, emerge as a source of uncertainty for investors in coming weeks as this situation plays out," he warned.