John Howard refused on Tuesday to be drawn on whether he would lead his new-look government into the next election, due in 2007, despite widespread speculation that he could step aside in favour of Treasurer Peter Costello.
Howard told a news conference that Robert Hill, the outgoing Defence Minister, who announced his resignation last week, will be replaced by Brendan Nelson, the Education Minister.
Howard, 66, has been in power at the head of his Liberal Party for nearly 10 years and Costello's ambitions to replace him are an open secret.
The cabinet reshuffle was prompted initially by the resignation of Hill, one of Howard's longest serving cabinet members, who is widely tipped to be named as Australia's ambassador to the United Nations.
Hill's resignation was followed on Sunday by that of Kay Patterson, Family and Community Services Minister and by the announcement of Ian Macdonald , the Fisheries and Conservation Minister that Howard had told him he would be dumped.
Sweeping out moderates
Both ministers had faced criticism for the handling of their portfolios.
Howard described the cabinet changes as "significant", but apart from the defence portfolio most senior ministers retain their posts.
"Howard is desperately protecting his own incompetent supporters, such as (Foreign Minister) Alexander Downer, and at the same time launching a purge of Liberal moderates"
Kevin Rudd, Labour's foreign affairs spokesman
Kevin Rudd, Labour's foreign affairs spokesman, said ahead of the reshuffle that Howard was sweeping out moderates to form a far-right ministry.
"What becomes clear through this reshuffle is that Howard is desperately protecting his own incompetent supporters, such as (Foreign Minister) Alexander Downer, and at the same time launching a purge of Liberal moderates," he said.
All three ministers "forced out" were moderates and supporters of Costello, Rudd said.