Both have conceded the party's policy offerings need examining.

Mr Bowen, a member of the Labor right, formally announced his bid on Tuesday morning in front of the house where he grew up in Smithfield in Sydney's west.

"I think the party does deserve a contest. I think that the party deserves a choice," he told reporters.

He took ownership of Labor's franking credits policy which the coalition devastatingly described as a "retiree tax" during the campaign, but said the party would start with a blank policy slate for the coming term.

"No political party ever takes to the next election exactly the same policies they took to the last. That would be dumb."

Mr Albanese, from the party's left, indicated on Sunday he'd make a second tilt for the leadership, which he lost to Bill Shorten in 2013.

He's been campaigning strongly since, saying Labor needs to take a hard look at some of its policies.

"We fell short," he told reporters in Sydney on Tuesday.

"We got the votes of one in three of every Australian on Saturday. We need to do much better."

He said many voters had contacted him about the franking credit overhaul and the party should consider whether it could be capped or grandfathered.

Nevertheless, he thought the Morrison government would have to act on the issue because its near $8 billion a year cost to the budget was unsustainable.

It is understood Labor's finance spokesman Jim Chalmers is receiving strong support to run, but his thinking has been impacted by factional colleague Mr Bowen's announcement.

Mr Bowen received a mix of positive and negative comments on his Facebook page on Tuesday, with many linking him with Labor's loss and calling for "generational change" in the party.

Deputy leader Tanya Plibersek, also from the left faction, ruled herself out on Monday, saying it was not her time.

Mr Bowen said if she wanted to stay on as deputy and the caucus agreed, he would be happy to work with her.

Other potential deputies he floated were Linda Burney and Mark Butler, although he won't be running on a ticket with anyone.

The leadership will be decided by a vote of grassroots members and the federal parliamentary caucus, with each group given 50 per cent weight.

Caucus will not be told the result of the grassroots vote before MPs make their decision.

Mr Albanese won the grassroots vote in 2013 but did not get enough caucus votes to defeat Mr Shorten.

"I'm happy to concede that Albo probably goes in favourite," Mr Bowen said.

"The Labor Party went in on Saturday as favourite, too. I'm a bit over 'favourites'."

Both men said they were pleased with the level of support they've found among caucus members.

Mr Shorten will continue as Labor's interim leader until the party's leadership is determined.

The party's national executive will meet on Wednesday to discuss the election process.

Australian Associated Press