A senior ALP faction leader branded Rupert Murdoch's News Limited "a threat to democracy" today as the feud between the newspaper group and the Government intensified.

Left faction convenor Doug Cameron's extraordinary outburst was sparked by a story in News Limited's Daily Telegraph reporting that former PM Kevin Rudd is being urged by his backers to challenge Prime Minister Julia Gillard.

Senator Cameron said he would take a motion to Labor caucus seeking to widen the existing inquiry into the media to look specifically at News Limited's "absolute hatred" of Labor.

"The inquiry we are having into the media - we should widen it to make sure we get a decent press in this country," he told reporters at Parliament House.

News Limited and the Daily Telegraph are not the only publications to report on a Rudd challenge, but Senator Cameron singled out the newspaper as "reprehensible".

"The Murdoch press are an absolute disgrace, they are a threat to democracy in this country and we should absolutely be having a look at them.

"They run unsubstantiated stories. I'm saying it's a fabrication. They run unsubstantiated stories in relation to the leadership of the party."

Senator Cameron said the Labor caucus was "completely in support of the leader" and said the Daily Telegraph story was "lies and nonsense".

"We should not be diverted by the Murdoch press and their attempt to destabilise this government. This is a good government. It doesn't suit Rupert Murdoch and his minions and we are prepared to take that on.

"Day in and day out the Murdoch press are putting false headlines out there. They are misrepresenting the position of the government. Day in and day out it's absolute lies and nonsense that is getting printed in the Murdoch press, and that's the issue."

At issue: The front page of today's Daily Telegraph ( ABC News: The Daily Telegraph )

He said he would move to change the terms of reference of the media inquiry to specifically examine News Limited reporting.

"It's my view - and I'm going to take it up in the next caucus - that we should widen the inquiry into the press in this country and make sure that we put a forensic analysis on the behaviour of the Murdoch press and the threat to democracy they are.

"They are setting out to try and destroy the Labor party. They are not reporting the facts. They are making stories up and the story that's there this morning is a complete fabrication."

Senator Cameron linked the Australian arm of the Murdoch empire to News International, the UK newspaper arm of News Corporation, which saw its popular News of the World tabloid closed after a phone tapping scandal.

"You can't tell me that the culture that permeates the Murdoch press internationally has not permeated Australia. I don't buy that for one minute."

And Senator Cameron questioned how the story was obtained in the first place.

"This report looks like a long boozy dinner and something's been made up. It looks absolute nonsense."

Liberal Senator Eric Abetz said Senator Cameron needed "liver cleansing treatment" and said he should not blame newspapers for Labor's problems.

"It is no secret around this building that Kevin Rudd is trying to make a comeback and here we have Senator Cameron blaming the Murdoch press for it. I ask you, if that is what he actually believes he is hugely deluded," Senator Abetz told reporters.

Mr Rudd has laughed off the speculation he will challenge for the Labor leadership.

"As I have said a thousand times before, I am very, very happy being the Foreign Minister of Australia," he said. "That hasn't changed and it won't change."

When contacted for comment, one of the report's authors, Daily Telegraph reporter Simon Benson, asked: "Do you normally ring other journos for comment?"

"Journos speaking to other journos - what a joke. You're a clown. You're a clown."

The other journalist on the joint by-line, Steve Lewis, declined to comment.

Today's story and Senator Cameron's comments will add to the bitter animosity between News Limited and the Government in the wake of strident criticism of the Daily Telegraph by Treasurer Wayne Swan and Communications Minister Stephen Conroy.

Greens leader Bob Brown has also been bitterly critical of News Ltd papers, particularly the Australian, which he brands "the hate media", and Senator Conroy has accused the Daily Telegraph of running a campaign for "regime change".

The Greens have called for the break-up of the Murdoch press - which owns almost 70 per cent of Australia's capital city newspaper market - but the current media inquiry is not considering the reform, instead looking at ways to strengthen the print media watchdog, the Press Council.