Peter Garrett was stripped of responsibility for the initiative, but has hung on to a Ministerial role. He'll now take on Environmental Protection, Heritage and the Arts.
Mr Abbott says the federal government is operating '"in crisis mode".
He says the government could not effectively manage the household insulation scheme, and Mr Rudd can't even sack a minister properly.
The Opposition leader accused the PM of "lacking guts".
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The timing of the announcement was also criticised by the Opposition leader.
Mr Abbott says keeping Mr Garrett in the Cabinet was a "charade" and that stripping him of responsibility would not be any consulation to the families of people affected by the "monumentally mismanaged" scheme.
