Gillard's victory settles question of who is the top dog

Bitter, divisive battle for leadership of Labor Party sees PM win out – for the time being

Julia Gillard will remain Australia's prime minister for the foreseeable future after seeing off a bitter leadership challenge by her predecessor and former foreign minister, Kevin Rudd.

However, the in-fighting in the Labor Party is unlikely to end, despite more than two-thirds of the 103 MPs and senators backing Ms Gillard as leader.

She won 73 votes, compared with 29 for Mr Rudd, in a ballot in Canberra this morning. One MP was absent after recently giving birth.

The challenge took place after Mr Rudd resigned as foreign minister during a visit to Washington last week, saying it was clear he no longer had Ms Gillard's trust. But it had been brewing since she ousted him as PM in June 2010, with the blessing of many of her colleagues. Mr Rudd, who had won a historic election victory in 2007, ending more than a decade of conservative rule, was languishing in the opinion polls before the coup. But colleagues now say he led a "chaotic" and "dysfunctional" government, leaving them with little option but to replace him.

Both he and Ms Gillard had called for unity following today's ballot. She said: "The important thing is that... there is a result and following that result, everyone accepts it and gets on with the job... The things that unite us in the Labor Party are far stronger than anything else."

But others warned that the Gillard government's problems – particularly the fact it appears to have no chance of winning an election due by late next year – will not go away.

Moreover, the party's image has been badly dented by the recent mud-slinging and recriminations.

Mr Rudd – accused by his colleagues of sabotaging the 2010 election campaign by leaking information damaging to Labor – said before the ballot that he was tired of being blamed for the government's problems. It was "time people accepted responsibility for their own actions", he said, in a pointed reference to Ms Gillard.

Although he has promised not to challenge Ms Gillard again, Mr Rudd's respectable defeat gives him enough credibility to bide his time and launch a second leadership bid.

"As the next election day approaches and Labor's unelectability is confirmed, rising panic in the caucus ranks could fuel a second Rudd strike in the year ahead," the Sydney Morning Herald's political editor, Peter Hartcher, writes in today's paper.

Alternatively, Labor could try to find a compromise third candidate for leader, untainted by the recent battles.

An opinion poll in today's Australian puts Labor support at 35 per cent, its highest for a year, but still behind the conservative opposition.

It also confirms recent polling suggesting that Mr Rudd is more popular than either Ms Gillard or the opposition leader, Tony Abbott.

Bruce Hawker, a Labor strategist who ran Mr Rudd's leadership campaign, warned that if the polls failed to improve, Labor would lose 30 seats at the next election, meaning it "could be out of government for the best part of a generation".

Mr Abbott called on the independent MPs who prop up Ms Gillard's minority government to withdraw their support and force an election.

"If the independents have any respect for good government in this country, they will bring down the curtain on this shambles," he said.