Senior Labor frontbencher Anthony Albanese is set to become the party's next leader, promising to sharpen its economic message and refocus on its traditional blue-collar base, after his only remaining challenger, Jim Chalmers, pulled out of the race.

Dr Chalmers spent Thursday morning calling colleagues to see if he had the numbers to get through a five-week leadership ballot but called Mr Albanese before lunch to offer him his "enthusiastic support".

Anthony Albanese says he will focus on "creating wealth, not just redistributing wealth". Credit:Wolter Peeters

"There were good reasons to run," he said. "But in the end I couldn’t be assured of winning, and if I did win, the extra responsibilities of leadership would make it much harder to do my bit at home while the youngest of our three little kids is only five months old."

Dr Chalmers, the opposition's Queensland-based finance spokesman, remains the favourite to become deputy leader, with his withdrawal from the contest viewed favourably among colleagues. The Brisbane MP, from the right faction of the party, is likely to be paired with Mr Albanese, as the opposition looks to regain support in northern Australia.