Australia's deeply unpopular government further damaged its public image Thursday with a bizarre internal power struggle in which the prime minister was forced to open her job to challengers only to find that no one from her party was willing to run against her.

The unprecedented spectacle of a leadership ballot without a challenger adds to the perception of dysfunction and turmoil that taints Prime Minister Julia Gillard's party and is likely to harm its already dismal chance of holding onto power at national elections in September.

Kevin Rudd, the prime minister whom Gillard ousted in an internal party coup in 2010, had been expected to attempt to replace her. For weeks, his backers had been frenetically recruiting Gillard loyalists who are becoming increasing spooked by the center-left Labor Party's dismal performance in opinion polls this year.

But Rudd made a surprising 11th-hour announcement that he would not attempt to return to the premiership by running for the party's top job, a likely sign that he wasn't certain he could unseat Gillard despite her unpopularity.

Former Australian prime minister Kevin Rudd, seen in this 2012 photo, had been expected by many to attempt to replace Julia Gillard. (Tertius Pickard/Associated Press)

Following the vote, Gillard declared that the meeting of Labor lawmakers had settled the cloud over her leadership for good.

"Today the leadership of our political party, the Labor Party, has been settled and settled in the most conclusive fashion possible. The whole business is completely at an end. It has ended now," she said.

She said she was "grateful to my colleagues for their continuing support."

Senior minister Simon Crean brought the leadership unrest to a head earlier Thursday by calling on his government colleagues to sign a petition to force a leadership vote if Gillard refused to call one. Such a petition would have needed the signatures of one-third of government lawmakers.

Crean — a former Labor leader who served in Gillard's government as minister for the arts, regional Australia, regional development and local government — said he wanted to be deputy leader and called on Rudd to challenge for the top post.

Gillard removed Crean from her Cabinet before the meeting.

Junior minister Richard Marles, who publically backed Rudd, resigned late Thursday from his portfolios of foreign and Pacific Island affairs.

Part of Rudd's appeal is opinion polling that shows he would be a far more popular among the public than Gillard. But several of his colleagues complain that he is chaotic, dysfunctional and abusive to work with.

Rudd led Labor to victory at elections in 2007 before being deposed three years later in the internal coup. He challenged Gillard last year and was roundly defeated in a ballot of Labor lawmakers, but recent reports suggested he now had stronger support.

"Kevin Rudd in my view has no alternative but to stand for the leadership," Crean told reporters before the meeting.

"He can't continue to play the game that says he's reluctant or he has to be drafted," he said.

Defence Minister Stephen Smith, a Gillard supporter, said other senior government figures who had publically urged a Rudd challenge need to "consider their positions," a suggestion that they should be demoted.

A change of leader could have brought down Labor's fragile minority government. A key independent lawmaker upon whom Labor relies to command a majority in the House of Representatives had warned that he might not support a government led by Rudd.

The ballot ended a tumultuous week for the government in which it was forced by lack of support to withdraw bills that that would have increased media regulation.

Starting Friday, Parliament will take a seven week break before Deputy Prime Minister and Treasurer Wayne Swan outlines his budget plans for the next fiscal year on May 14.