Julia Gillard became first woman PM of Australia

Australia appointed its first woman prime minister Julia Gillard on Thursday, who vowed to end division over a controversial mining tax, resurrect a carbon trade scheme and call elections within months.

Former prime minister Kevin Rudd made an emotional and ignominious exit, quitting just before the Labour party was to set dump him in a leadership ballot.

The Rudd government's dramatic slide in support this year sparked fears within the ruling party of an electoral defeat at a poll expected around October.

"I asked my colleagues to make a leadership change because I believed that a good government was losing its way," Gillard told a news conference.

Centrebet bookmaker made a Gillard Labour government outright favourite to win the next election, expected around October.

Gillard, 48, immediately offered to end a bitter dispute over a controversial "super profits" mining tax, which is threatening $20 billion worth of investment and has unnerved voters, saying she would throw open the door for fresh negotiations.

But she stressed miners should pay more tax.

"To reach a consensus we need to do more than consult, we need to negotiate. We must end this uncertainty which is not good for this nation," she said, adding the government would end its mine tax advertisements and called on miners to withdraw their multi-million dollar ad campaign which was worrying voters.

The Australian dollar briefly jumped after the leadership change, while shares in BHP Billiton, the world's biggest miner, and Rio Tinto rose 2%, on hopes of a mining tax compromise, before coming off their best.

Gillard's takeover would see the government resurrect its failed climate change policy, a carbon trade emissions scheme, with the new prime minister saying she was disappointed in the government's failure to pass laws to set a price on carbon.

"If elected as prime minister I will re-prosecute the case for a carbon price at home and abroad. I will do that as global economic conditions improve and our economy continues to strengthen," she said.

Rudd became the shortest-serving Australian prime minister since 1972, with his leadership falling apart after a string of poor opinion polls showed him losing ground over recent decisions to shelve a carbon-reduction scheme and impose a new mining tax.