Retiring former Labor minister Bob Carr contends Julia Gillard and Kevin Rudd damaged the party's chances of holding onto government because they lacked canniness and cunning on key issues.

Senator Carr on Wednesday announced he will retire on Thursday, despite having been re-elected for a further six-year term at the September election.

Labor needs to move beyond the tension of the leadership rivalry between Mr Rudd and Ms Gillard and embrace the new leadership team of Bill Shorten and Tanya Plibersek, he said.

If that occurs, Labor could win back government at the next election.

Asked for his assessment of Labor's leadership in recent years, Senator Carr said: "I was struck by a lack of canniness, a lack of caution and cunning."

He said the issue of pricing carbon had been mishandled and should have begun under Mr Rudd with a modest scheme applied only to the electricity sector.

"To have moved cautiously to start with, that ... would have been a canny approach," he said.

Senator Carr believes a change in weather to persistent dry and hot conditions could shift public opinion back to urgent action on climate change and the need to price carbon.

The former foreign minister also took aim at Mr Rudd's decision in 2007 to dismantle the Howard government's so-called Pacific Solution, set up to stem the flow of asylum seekers on boats, without weighing up the problems it would cause.

He urged Labor to stick by the arrangement with Papua New Guinea to process and resettle asylum seekers.

Senator Carr said his decision to switch support from Ms Gillard to Mr Rudd came early in 2013 when it appeared Labor was on track for a massive election loss, from which it would be hard to rebuild.

"I certainly thought the government had lost its way when, at the cabinet meeting convened to discuss coal seam gas, (which he had decided not to attend) there was a big package of media reforms dropped on the table," he said.

"To embark on a row with the media in the six-month countdown to a general election was a radical recasting of all the (political) rules I had learned."

However, he said the cabinet process had generally worked well under Ms Gillard and Mr Rudd and they both achieved many positive policies.

Senator Carr said Mr Shorten, who he supported in the leadership ballot, would give Labor the best chance of getting back to government within three years.

"I believe that Bill Shorten and Tanya Plibersek have got what it takes to get back to government in three years, a one-term strategy, or to get very close to it."