Mr Abbott said the leadership instability was damaging investment, employment and confidence.

''Kevin Rudd has confirmed two things - that the faceless men are running the Labor Party and that the instability at the top of this government is damaging our country,'' he said.

''Kevin Rudd's statement tonight confirms that this government is unworthy to continue in office.

''Only the Coalition can provide the strong and stable government that will address the issues facing our country and restore hope, reward and opportunity for all Australians.''

In an interview before Mr Rudd announced his resignation, Mr Abbott said that relationships within the Labor Party had become so poisonous that it was hard to imagine that the party could provide a functioning government.

Federal member for Canberra and former diplomat Gai Brodtmann praised Mr Rudd's performance as foreign minister last night but refused to be drawn on the party leadership tensions.

''He's been a great foreign minister and played a major role in our position on the G20 and in Asia, the Middle East and in Africa,'' Ms Brodtmann said.

Fraser MP Andrew Leigh also praised Mr Rudd's work as foreign minister and reiterated his support for Prime Minister Julia Gillard.

''Kevin served as an admirable foreign minister in the activist traditions of [Bert] Evatt and [Gareth] Evans,'' Mr Leigh said.

''I think his work on foreign policy is important and he's served the country well in that regard.''

Independent MP Tony Windsor predicted that Ms Gillard would retain the Labor leadership.

''My guess is Julia Gillard would be the Prime Minister this time next week and probably for many months to come,'' Mr Windsor said. ABC election analyst Antony Green predicted Ms Gillard would retain the Labor leadership but would not lead the party to the next election.

''In my view I can't see Julia Gillard leading the government to the next election,'' Mr Green said. ''She is just not popular enough, the government's polling is poor. Sometime between now and the election there will be a change of leadership.''

Labor strategist and Rudd supporter Bruce Hawker said the outgoing foreign minister was the most popular politician in Australia.

Mr Hawker said backbenchers would consider their self-interest in retaining their seats at the next election when deciding on the Labor leadership.

''One question any backbencher has to ask himself is who is best to lead us to a win against Tony Abbott, because far too much is at stake for the government and the country if Abbott wins the next election.'' with AAP