A day before she lost in the Australia Labor Party leadership challenge on Thursday night, then Prime Minister Julia Gillard was the cover girl for Australian Women's Weekly. She was shown indulging in her favourite hobby - knitting.

Was the cover photo, seen by many Australians as a put on, prophetic in the sense that Ms Gillard would now have more time to knit kangaroo toys for the royal baby of Prince William and Kate Middleton?

Will she now knit for a living as grannies did since she has promised to quit politics with her 45-57 loss to her predecessor, Kevin Rudd?

Ms Gillard said after the party caucus, "I will not recontest the federal electorate ... at the forthcoming election," quoted BBC.

She wished Mr Rudd well and thanked Australians for the opportunity to serve them in her farewell speech below.

Despite her loss, the 52-year-old Ms Gillard made Australian history by becoming the first female prime minister. Her decision to quit politics ends her 15-year colourful political career when she was elected MP in 1998 for the seat of Lalor, Victoria.

She was appointed shadow minister for Population and Immigration in 2001 and deputy prime minister in 2007 when the ALP won the federal election. Ms Gillard served as Minister for Education and Minister for Employment and Workplace Relations and became Australia's 27th prime minister when Mr Rudd quit after he lost support of the party.

The past two weeks was a turbulent one for Ms Gillard amid speculations of Mr Rudd challenging her to a leadership caucus, questions over the sexuality of her live-in partner - hairdresser Tim Mathieson - and the ruckus created by her wearing a low cut dress in Parliament that showed her cleavage.

Mr Rudd, who is looking into the possibility of moving the election earlier to August from the Sept 14 date set by Ms Gillard, admitted he broke his promise not to challenge Ms Gillard's leadership of the party which is doing badly in pre-election surveys.

"I do not seek to fudge the fact I have changed my position on the leadership ... the truth is if we are all being perfectly honest about it right now is that we are on course for a catastrophic defeat, unless there is change," The Herald Sun quoted the returning prime minister.

"The Australian people deserve a competitive choice at this election," he added.

Ms Gillard believes her three years in power were not lost because she broke the glass ceiling for female politicians, while holding a knitting needle.

"What I am absolutely confident of is it will be easier for the next woman and the woman after that and the woman after that, and I'm proud of that," BBC quoted the just deposed knitting prime minister.

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