The challenge has been triggered by Rudd going from a popular leader at the turn of the year to one who is in danger of losing office after just one term, the next election has to be held by April next year. Rudd has been hurt by a battle with the mining industry over a potentially devastating new tax on it; the industry has taken out a huge and highly effective advertising campaign against the measure. Rudd has also been all over the place on the question of a carbon trading scheme.
One British Labour source with good connections to the Australian Labour party tells me that the situation is so fluid that it is hard to predict what will happen. But there could be a new Australian leader flying to the G20 at the weekend.