Embattled Australian PM says she's staying

  Australian Prime Minister Julia Gillard said her government would serve a full three-year term as speculation mounted that Foreign Minister Kevin Rudd is preparing a leadership challenge. Gillard came to power in mid-2010 after ousting Rudd, who was then prime minister, in a sudden and brutal Labor Party coup. But she has never been as popular with voters as Rudd, who still enjoys wide support, and leads a fragile coalition government backed by several independents. Gillard said she intended to remain in charge, despite opinion polls suggesting she would lose an election. "As we move towards the end of 2011 and start looking to 2012, I think we've got to remember that the predictions this time last year were the government wouldn't last," she said in an interview with the Sydney Morning Herald, published on Saturday. "I've never had the slightest doubt that this government would go to the next election at the normal cycle in the second half of 2013. "I'd hope that as we leave 2011, more people will share my view than perhaps used to." The leadership question was raised again during the week when Gillard reshuffled her cabinet, promoting two MPs who were instrumental in installing her at The Lodge. However, the Herald said that at least five of her 30 ministers support Rudd and when Resources Minister Martin Ferguson was asked whether he preferred Rudd to Gillard on Thursday, he replied his loyalty was to the Labor Party. Ferguson issued a statement the following day saying Gillard had his support and was "doing a remarkable job". But one minister demoted from cabinet in the shake-up, Kim Carr, has spoken publicly about his disappointment, saying Gillard had not criticised his performance when she removed him. "I'm obviously at a loss to understand some of these matters," Carr said. As Gillard prepares to take a two-week break for Christmas, she said her priorities for 2012 would include keeping a close eye on the economy amid the continued fall-out from the eurozone crisis. She said if conditions in Europe deteriorated further, interest rate cuts could be used to provide stimulus. "If circumstances worsen, there is plenty of room for our nation on the monetary policy side, the interest rate side," she said. "Now, that is in the hands of the (independent) Reserve Bank, but that does give our nation opportunities to deal with impacts on global growth if they are more profound than we can see now."