Prime Minister Julia Gillard has announced an extensive ministerial reshuffle that has increased the size of Cabinet to 22 ministers.
The reshuffle includes extra portfolio responsibilities for Climate Change Minister Greg Combet, who adds industry and innovation to his brief.
Bill Shorten has also been given a larger role, being promoted to Cabinet as the employment and workplace relations minister, ahead of a review of the contentious Fair Work Act. He has also retained responsibility for financial services and superannuation.
Other winners from the reshuffle are Tanya Plibersek, who has been appointed minister for health, and Mark Butler, who has added social inclusion to mental health and ageing.
Ministers Plibersek and Butler have also been promoted to cabinet, increasing its size from 20 to 22 ministers.
"With this new cabinet in place we will see an important mix of new energy, as well as wise heads and experienced heads," the prime minister told reporters in Canberra.
"This will give us the focus and fire power that we need in 2012."
Earlier Small Business Minister Nick Sherry preceded Ms Gillard's formal announcement by confirming he was stepping down from the ministry.
He will retire from federal politics after the next election, likely to be in 2013.
Tasmanian MP Julie Collins has been promoted to the ministry and will look after community services, indigenous employment and economic development, the status of women.
Previously she was a parliamentary secretary for community services.
Mark Arbib has been promoted to the position of assistant treasurer and minister for small business, as well as retaining the sport portfolio.
Ms Gillard said Senator Arbib would help sharpen the focus of people wanting to start the own small business.
"I will be looking to Mark Arbib ... to be in touch with the needs of our small business community and for being in touch with Australians who see their future being creating their own small business," she said.
Regarding Mr Shorten, she said: “I have asked Bill not only to focus on our Fair Work agenda ... but to also broaden our description and thinking about workplace relations”.
"So it deepens our national understanding of how workplaces are changing and the challenges for work and family life as that change occur."
Brendan O'Connor will join the early childhood and education team of School Education Minister Peter Garrett and Childcare Minister Kate Ellis.
Mr O'Connor will assist Mr Garrett with the 2012 implementation of the government's response to the Gonski review of school funding.
He will also take over the human services portfolio, replacing Ms Plibersek.
Nicola Roxon has been named attorney-general, replacing Robert McClelland who will remain in cabinet as minister for housing, homelessness and emergency management.
"Her first love was law," Ms Gillard said of the outgoing health minister.
"She will be the first woman in the nation's history to serve in that role and I know that she will do it with distinction."
Ms Gillard said the changes would mean an expansion of the cabinet from 20 to 22.
Ms Gillard said Mr McClelland's appointment to emergency services was a sign of her determination to have a minister at the highest level responsible for the commonwealth's response to natural disasters.
He also has responsibility for housing.
Former industry and innovation minister Kim Carr becomes manufacturing and defence materiel minister, and is demoted to the outer ministry.
Ms Gillard denied she was forced to expand the size of cabinet because people would not step down.
She said the increase was caused by the growth in the breadth of the government's reform priorities.
The reshuffle was about ensuring the government's reform areas were reflected around the cabinet table, the prime minister said.