Prime Minister Julia Gillard has announced her new-look Cabinet after earlier confirming that former prime minister Kevin Rudd would be given the Foreign Affairs portfolio.

Former foreign affairs minister Stephen Smith has moved aside to allow Ms Gillard to fulfil her promise to Mr Rudd, the man she deposed as prime minister and Labor leader.

Ms Gillard confirmed that Wayne Swan will remain Treasurer, former climate change minister Penny Wong will take over from Lindsay Tanner as Finance Minister and Greg Combet has been promoted to Climate Change Minister.

There are four new ministers, with Bill Shorten given the role of Assistant Treasurer and Minister for Superannuation and Financial Services. Mark Butler will focus on Ageing and Mental Health, Gary Gray is the new Special Minister of State and Jason Clare will focus on Defence Procurement.

Mr Rudd says it is a great honour to be Foreign Minister and says he can work with Ms Gillard even though she replaced him as Prime Minister.

"There are national interests in this country which extend far beyond the personal interests of any individual; that applies to me as well," he said.

But Deputy Liberal Leader Julie Bishop says Ms Gillard should not have appointed Mr Rudd to Foreign Affairs.

"The leader that was sacked by his own party because he led the Government off course and caused the Government to lose its way, is now expected to navigate Australia through our foreign policies," she said.

"The leader who was sacked by his own party because he couldn't get along with people is now Australia's number one diplomat."

Mr Smith will replace John Faulkner as Defence Minister, with responsibility for Australia's involvement in the war in Afghanistan.

Of his new role, Mr Smith earlier said he was committed to holding discussions on Australia's role in Afghanistan.

"One thing I am looking forward to, so far as Afghanistan is concerned, is a parliamentary debate on Afghanistan that of course has come out of discussions with the independents and Mr Wilkie and the Greens," he said.

"My colleague, Defence Minister Faulkner, very strongly supports that notion and I think that is important."

Former environment minister Peter Garrett will now take on the Schools, Early Childhood and Youth portfolio.

"Making sure that we focus on education is vital, giving every child a chance of a great school education," Ms Gillard said.

"That's why I have asked Peter Garrett to be the Minister for Schools, Early Childhood and Youth to continue a key focus on the education reforms that this Government has started to deliver and will continue to deliver."

Chris Bowen will take over the Immigration Portfolio from Chris Evans, who will be the new Minister for Employment, Skills and Workplace Relations.

Ms Gillard says she is keeping her promise to create a new department to look after regional Australia and has given Simon Crean the new Regional Affairs portfolio. He will also look after Local Government and the Arts.

"Simon Crean will work with a team of ministers and parliamentary secretaries who will seek to represent regional Australia to the Government," she said.

"This is delivering on the focus that I agreed with the independents in the House of Representatives, it's delivering on a promise to regional Australia to focus on their needs."

Craig Emerson is the new Trade Minister, while Tony Burke will be Minister for a Sustainable Australia, Communities, Environment and Water.

Joe Ludwig will take over Mr Burke's Agriculture portfolio and Nick Sherry will take Small Business from Dr Emerson and will also be Assistant Tourism Minister.

Kate Ellis has been moved from her Sport portfolio to Employment Participation and Childcare while Mark Arbib has been given Indigenous Employment, Social Housing, Homelessness and Sport.

Tanya Plibersek will become Human Services and Social Inclusion Minister when she returns from maternity leave.

Warren Snowdon will be Defence Science and Veterans Affairs Minister after Allan Griffin retired this week.

Kate Lundy has been given the role of Parliamentary Secretary to the Prime Minister and Justine Elliot has voluntarily stepped aside from the Ageing portfolio to become Parliamentary Secretary for Trade.

Health Minister Nicola Roxon, Community and Indigenous Affairs Minister Jenny Macklin, Resources, Energy and Tourism Minister Martin Ferguson and Industry, Innovation and Science Minister Kim Carr will all remain in their portfolios.

Anthony Albanese is staying on as Infrastructure and Transport Minister, Stephen Conroy will keep his Communications portfolio, Brendan O'Connor remains Home Affairs Minister and Robert McClellend will remain Attorney-General.

Yesterday independent MP Rob Oakeshott declined Ms Gillard's offer for a role in the ministry because he did not want the regional development package to be derailed by forces in Parliament

The new ministry will be sworn in by Governor-General Quentin Bryce on Monday.