Australian Prime Minister Julia Gillard has admitted the reshuffling of her cabinet involved some "difficult conversations", but says her new team has the skills to deliver government priorities in 2012.
Ms Gillard on Monday unveiled an expanded 22-member cabinet, elevating Bill Shorten, Mark Butler and Tanya Plibersek, while demoting industry minister Kim Carr to the outer ministry.
She also took the attorney-general role from Robert McClelland but kept him in cabinet to oversee emergency management and housing.
Mr McClelland on Tuesday said he would have preferred to stay in the role, which has gone to outgoing health minister Nicola Roxon.
"Having said that, it is an honour to serve the Australian people in cabinet," he told ABC Radio.
Ms Gillard acknowledged Mr McClelland did not want to leave his portfolio.
"Being involved in these conversations about change obviously means you have a set of difficult conversations," Ms Gillard said.
"What I have done is to select the best team, the strongest team to deliver the government's priorities in 2012 which are about jobs, the economy and fairness."
Ms Gillard denied she had rewarded Mr Shorten, the new workplace relations and employment minister, and incoming assistant treasurer Mark Arbib for supporting her leadership coup in 2010.
She also rejected suggestions the expansion of the cabinet showed she lacked the authority to force ministers to stand aside.
"It's the size because of the breadth of the government's priorities," Ms Gillard said.
Unions and the opposition have attacked the demotion of Senator Carr, who retains the manufacturing portfolio but will now work under Climate Change and Industry Minister Greg Combet.
Coalition industry spokeswoman Sophie Mirabella said it was "an extraordinary downgrade" of manufacturing and industry, while officials in the Australian Manufacturing Workers Union said it showed the prime minister did not understand the importance of manufacturing.
Labor sources suggested Senator Carr, a Left powerbroker from Victoria, had been penalised for switching his leadership support to Kevin Rudd.
Mr Rudd, who retained the foreign affairs job, told ABC Radio from New York that while the reshuffle was entirely a matter for the discretion of the prime minister, Senator Carr had been a very good minister for industry.
"He was largely responsible during the global financial crisis for ensuring that none of the Australian car companies fell over," the former prime minister told ABC Radio.
"I have much respect for his work on that account."
Senator Carr said he was committed to securing the future for Australian manufacturing and its one million workers.
Ms Gillard nominated the economy, a clean energy future, jobs, health, mental health, disability, ageing and social inclusion as 2012 priorities for the government.
The new ministry will be sworn in by Governor-General Quentin Bryce in Sydney on Wednesday.
