Australia is to get a new prime minister, Malcolm Turnbull, after Tony Abbott lost a challenge for the leadership of the Liberal Party, the senior partner in the ruling conservative coalition.

The former communications minister, Malcolm Turnbull, is to become Australia's 29th prime minister after defeating Abbott in a party room spill with 54 votes to 44.

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Turnbull is expected to be sworn in as prime minister by Australia's governor-general Peter Cosgrove on Tuesday.

Julie Bishop, the foreign minister, who had reportedly sided with Turnbull to call on Abbott to quit earlier in the day, has retained her position as deputy leader of the Liberal Party by 70 votes to 30.

In the current parliament, whoever leads the Liberal Party becomes prime minister as head of the conservative coalition in which it is the senior partner.

"This will be a thoroughly liberal government. It will be a thoroughly liberal government committed to freedom, the individual and the market," Turnbull told reporters after winning the leadership spill.

Turnbull earlier on Monday said he informed Abbott he would challenge him for the leadership after losing confidence in his management of the economy.

"The prime minister has not been capable of providing the economic leadership our nation needs. He has not been capable of providing the economic confidence that business needs," Turnbull told reporters in Canberra.

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Abbott had survived a leadership challenge in February after poor polling, policy backflips and an unpopular budget generated a backbench revolt, fuelled by questions about the prime minister's judgement.

No challenger emerged then, after a vote on whether there should be a leadership contest was defeated 61 to 39.

But in the months since, Abbott has failed to turn around the polls, bolster the economy or stop damaging leaks from within his party.

Abbott has failed to turn around the polls, bolster the economy or stop damaging leaks from within his party [EPA]

Turnbull, a former journalist, lawyer, investment banker and entrepreneur who represents an upmarket Sydney electorate, argued earlier on Monday that the government's message was not getting through and that a new, more open approach was needed.

The communications minister, long considered one of the most credible alternatives to Abbott, quit the cabinet in a shock move that triggered the party ballot.

"This course of action has been urged on me by many people over a long period of time," Turnbull said ahead of the vote. "We need a different style of leadership."

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The leadership vote continues an extraordinarily volatile period in Australian federal politics, especially as the Liberals were elected in 2013 as a stable alternative to the then Labor government.

Labor came to power under Kevin Rudd at the 2007 elections, only to dump him in the face of poor opinion polling for his deputy Julia Gillard in 2010, months ahead of elections.

The bitterly divided and chaotic government then dumped Gillard for Rudd just months before the 2013 election.

Before Rudd was elected in 2007, John Howard was in power for almost 12 years.

The government has trailed the opposition in a range of opinion polls since April last year. 

Malcolm Turnbull is to be sworn in as Australia's 29th prime minister [EPA]

Source: Agencies