AAP

Labor MPs will decide the fate of Prime Minister Julia Gillard in a caucus ballot at 4.30pm (AEDT), after she called a spill in the wake of demands from Kevin Rudd supporters.

Labor frontbencher Simon Crean met with Ms Gillard for a second time on Thursday morning expressing his concern about the direction of the government and to ask for a spill, but she declined it.

However, after meetings with other senior party members, including Leader of the House Anthony Albanese, the prime minister later told parliament at the start of question time that the ballot would be held.

Mr Rudd has yet to give any indication he will stand for the leadership.

But Mr Crean has told reporters he would himself run for the deputy's position.

It is understood Mr Albanese is Mr Rudd's preferred deputy, with Chris Bowen slated for the treasury role.

When he lost a leadership ballot in February 2012, Mr Rudd vowed that he would never again put his name forward.

At that time he only secured 31 votes to Ms Gillard's 71.

Mr Crean told reporters in Canberra the party was at a "stalemate" and something had to be done.

"This is not personal. This is about the party, its future and the future of the country," he said.

"It's not just about changing leaders but showing leadership. That is what we are elected to do."

Mr Crean said Mr Rudd had no alternative but to stand.

"He cannot continue to play the game of being reluctant," Mr Crean said.

Ms Gillard, who gave a rallying speech in parliament as the opposition attempted a no confidence motion, is believed to have a slim majority in the 102-member caucus, with only about 10 to 12 votes leaking to Mr Rudd since the last ballot.

Foreign Minister Bob Carr is overseas and cannot vote.

Opening question time, Ms Gillard challenged Opposition Leader Tony Abbott: "Take your best shot".

Mr Abbott said his no-confidence motion, which did not get to a vote, was about standing up for the "decent, honest, hard-working people of Australia".

"This is about reassuring the Australian people that we are a great people and we are a great country, just momentarily let down by a very poor government," Mr Abbott said.

Ms Gillard drew a line in the sand, arguing that the government had delivered on health, schools, workplace fairness and jobs.

"It is what it has done under my prime ministership and it is what it will do under my prime ministership from this day forth."