Property developers will be banned from standing as New South Wales Labor candidates under new party rules that have been dismissed by the Opposition as an "election fix".

Prime Minister Kevin Rudd has taken the rare step of launching a federal ALP intervention into the scandal-plagued NSW branch, saying he is "appalled" by the recent allegations of corruption levelled at former state ministers.

The NSW Independent Commission Against Corruption (ICAC) has been investigating the property dealings of former powerbroker Eddie Obeid and former minister Ian Macdonald, who have both been expelled from the party.

Mr Rudd has demanded the NSW party implement changes within the next 30 days - a process that will be overseen by the ALP national executive.

The changes include a "zero tolerance" stance on corruption and a ban on property developers standing as Labor candidates unless they "divest themselves of any major property development interest".

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NSW State Secretary Sam Dastyari, who has welcomed the federal takeover, admits that it is "one of the more controversial measures".

Mr Rudd says the involvement of property developers is a problem, particularly in New South Wales.

"Let's just be frank. There's a particular problem when it comes to the property development industry," Mr Rudd said.

"The reason is you have such enormous discretionary powers available.

"I'm just calling it for what it is, rather than trying to be too pure about it all. This is a problem.

The Property Council of Australia says the ban is "absurd".

The Property Council's NSW executive director, Glenn Byres, says it creates "a system of electoral apartheid based on occupational histories".

But Mr Byres' own work history highlights the links between the NSW ALP and the property sector, because he once worked as a spin doctor for both former premier Morris Iemma and former federal Labor party leader Mark Latham.

Abbott says zero tolerance approach an "election fix"

Opposition Leader Tony Abbott says the measures are "a joke".

Sorry, this video has expired PM details intervention into NSW Labor

"This isn't a corruption cure, this is an election fix," he said.

"Let's never forget that Mr Rudd was quite happy to be installed by the faceless men, then of course the faceless men sacked him, now he's happy with the faceless men because they've put him back.

"And all we've seen today is that for just 30 days the faceless men in Canberra will be giving direction to the faceless men in New South Wales. It's just a joke.

"The only way to clean up the Labor party is to give them time out in opposition so they can get their house in order."

Changes welcomed by ALP members

NSW State Secretary Sam Dastyari says changing the culture of the state ALP will take time but described this federal intervention as "the biggest party reform act in over 40 years".

"There's no silver bullet here, the Labor party in New South Wales knows it has to change and it is changing.

Sorry, this video has expired NSW Labor Secretary backs Rudd's reforms ( Political editor Lyndal Curtis )

"This is taking the governance of the party to the next step and frankly, if my inbox is anything to go by, it's something that party members across the state are welcoming."

Mr Rudd has also flagged broader reform to the party nationally, saying: "this is the beginning".

"The time has come to modernise the Australian Labor Party, we need to open the windows and the doors of the great Australian Labor Party to the Australian community," he said.

"We want of course continued full participation from members of our great Australian trade unions. We must also recognise there is a broader church in Australia who must be represented within the Australian Labor movement as well.

"The task of wider reform of the Australian Labor Party beyond New South Wales lies ahead of us."

The last time there was a federal intervention into NSW Labor was in 1971, a move that was prompted by allegations of rorting.