Prime Minister Julia Gillard says her reshuffled cabinet, which includes three new faces, will give her Labor government extra "firepower" in 2012.
With Small Business Minister Nick Sherry announcing he will go to the backbench before retiring from the Senate in 2013, Ms Gillard has boosted her cabinet to 22 members, elevating Bill Shorten, Tanya Plibersek and Mark Butler, and demoting industry minister Kim Carr.
Mr Shorten, a 44-year-old former Australian Workers Union boss touted as a future Labor leader, is the biggest winner in the line-up. He will add workplace relations and employment to his current financial services and superannuation roles.
Former human services minister Ms Plibersek takes on health, replacing Nicola Roxon who remains in cabinet but will become Australia's first female federal attorney-general.
As attorney-general, Ms Roxon will square off against the big tobacco companies challenging the government's laws mandating plain packaging for cigarettes.
Mr Butler, a key figure in the ALP's Left faction, retains his mental health and ageing portfolios and takes on social inclusion.
Senator Carr, the former industry minister, will work on a manufacturing jobs strategy under Climate Change Minister Greg Combet, whose job will be expanded to cover industry and innovation as he pitches the benefits of the carbon pricing scheme that starts in July 2012.
"With this new cabinet in place we will see an important mix of new energy, as well as wise heads and experienced heads," Ms Gillard told reporters in Canberra.
"This will give us the focus and firepower that we need in 2012."
Opposition Leader Tony Abbott said the prime minister's third ministry change since taking the leadership from Kevin Rudd in June 2010 was aimed at rewarding her supporters, such as Mr Shorten.
"Basically the prime minister is trying to buy the loyalty of the faceless men," he said.
Mr Shorten said industrial relations would be an important issue in 2012, not only in terms of improving fairness, pay and conditions in the workplace through a review of the Fair Work Act starting in January, but politically as Labor takes the fight up to the coalition.
"Tony Abbott is the faceless man of industrial relations and he has faceless policies," he told reporters.
"We we all know they exist - we all know he wants to turn back the clock."
Labor strategist Bruce Hawker said it made sense to retain Mr Rudd as foreign minister amid speculation he could make a comeback as Labor leader.
"It would have been foolish to get rid of him. It would have been provocative," he told AAP.
"Rudd is still very popular and a competent minister."
Asked whether factional interests came into her decision making, the prime minister told reporters in Canberra: "I've chosen the strongest possible team."
Most senior ministers retained their positions. Senator Chris Evans will work alongside Mr Combet as minister for tertiary education, skills and research in the new mega-department.
Former attorney-general Robert McClelland - who with education minister Peter Garrett is understood to have resisted calls to step aside from cabinet - retains his seat at the table but will now be responsible for emergency management and housing.
Cementing their place in the outer ministry, the prime minister has rewarded up-and-comers Jason Clare (home affairs and justice), Julie Collins (community services) and Mark Arbib (assistant treasurer).
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