The federal Labor caucus has endorsed a plan to allow the parliamentary leader to be elected by MPs and the party's 40,000 rank-and-file members.
It has also endorsed the new asylum-seeker agreement with Papua New Guinea.
Amanda Cavill reports.
The Caucus meeting has backed Mr Rudd's changes to Australia's asylum-seeker policy which is designed to ensure that no person arriving by boat will be processed in Australia nor resettled here either.
Under the policy, all asylum-seekers arriving by boat will be transferred to Papua New Guinea for processing.
If found to be genuine refugees, they will be settled in PNG, not Australia.
If their asylum claims fail, they will be returned to their home country or a third country.
However, not all federal Labor MPs agree with the policy.
House of Representatives Speaker Anna Burke believes voters will find it hard to distinguish between the asylum-seeker policies of Labor and the Coalition.
She's told the ABC the policy's one-sided.
"But there is still a refugee issue back in Malaysia and Indonesia. My concern is this is a very much one-sided solution to a problem, stopping boats. What are we still doing about the asylum-seeker issue and certainly from the emails I have been reading this morning from my electorate, they are very unhappy with the proposal from the Labor party."
A small but noisy protest outside the Sydney caucus meeting called for the policy to be immediately wound back.
Prime Minister Kevin Rudd says he expects opposition to the policy, and admits it won't be easy to implement.
"This is going to take quite a while to roll out. This is a big operational undertaking and I have said from the outset there'll be bumps in the road. There'll be challenges on the way we understand that. People will engage on the politics of this big time, as well as the prospect of legal challenges here and in Papua New Guinea. This is what happens when you seek to act decisively on something as fundamental as this. But we make no apology for the decision we have taken."
The federal caucus has also voted in favour of Kevin Rudd's changes to the way Labor leaders are elected.
Mr Rudd wants to ensure that if a Labor leader takes the party to electoral victory, he or she would be almost guaranteed to serve as Prime Minister for the full term.
If the leader does not succeed in winning government, a ballot would be held for a new one.
Other than that, the only way there would be a leadership change mid-term would be through serious illness or death, if the leader called for a spill, if the leader resigned, or if at least 75 per cent of federal Labor politicians signed a petition saying the leader had brought the ALP into disrepute.
But if Labor is in opposition, a petition signed by only 60 per cent of caucus members would now be required for a leadership vote.
Currently only 30 per cent is required.
Mr Rudd says says he expects a discussion about further party reform to continue after the federal election.
But he doesn't think the party will accept a demand from some trade union officials for them to get a role in picking the parliamentary leader.
"What we seeking to do here with this reform is to say to all our friends and supporters in the trade union movement, 'We want you active in the branches of the Australian Labor Party.' That's what we are saying. So when you have got a whole lot of people out there who are members of trade unions, we want to you to be active in you local branch so that you are part and parcel of local community life. That's where we want to see the activism of our trade union friends."
Although Caucus has agreed to the proposals, they still need to be endorsed by the ALP national conference, to be convened next year.
Opposition Leader Tony Abbott says there's no guarantee that the changes will ever go ahead, particularly if the unions have the last word.
"Well, again more fake change from the great pretender of Australian politics. What the Caucus does pre-election, the Caucus can change post-election. And the one thing you can be sure about with the Labor Party is the faceless men are always in charge."
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