Julia Gillard became Australia's first female prime minister on Thursday after incumbent Kevin Rudd stood aside in her favour.
After Rudd conceded the numbers were against him, a secret ballot of the Labor Party members of parliament was not needed.
Treasurer Wayne Swan, who was among those who switched his allegiance, was elected unopposed as deputy party leader and will therefore serve as deputy prime minister.
The Labor government has only a few months to run before a parliamentary election later in the year.
In November 2007, Rudd led Labor to a victory over the conservative coalition after they had been in opposition for 11 years.
Labor's chances of re-election were dragged down by a spectacular collapse in support for Rudd and the party moved to oust him. The party faithful are hoping that a new leader will revive its fortunes.
Sportsbet spokesman Haydn Lane said his betting agency now had the Liberal Party-led coalition favourite to win the election.
"The betting has been almost one-way traffic for the coalition for some time and we don't think voters will forgive Labor for their recent performances," he said.
But rival Internet betting agency Centrebet had Labor in front.
Rudd had been scheduled to leave for Canada later in the day to attend the G20 leaders' meeting in Toronto, where he was to have met with US President Barack Obama.
It was unclear whether Gillard, a British-born former union lawyer, will attend the G20 meeting in his place.