"Our father, Gough Whitlam, has died this morning at the age of 98," they said in a statement.

"A loving and generous father, he was a source of inspiration to us and our families and for millions of Australians.

"There will be a private cremation and a public memorial service."

Abbott ordered that all flags to fly at half-mast on Tuesday, and on the day of Whitlam's State Memorial Service.

Labor Party leader Bill Shorten praised Whitlam, saying he redefined Australia, and in doing so helped improve the lives of many people.

"He reimagined Australia as a modern nation where equality of opportunity belonged to all," Shorten said.

"Regardless of one's policies the nation has lost a legend ... He redefined our country and in doing so he changed the lives of a generation."

Former Labor Prime Minister Julia Gillard honored Whitlam "as a man of the highest political courage" and "a giant of his era."

Whitlam led Labor to its first federal election victory in 23 years in December 1972 on the back of the famous "It's Time" campaign.

As prime minister, he was as much lauded for his reformist leadership and eloquence as he was lambasted for his autocratic style and profligacy.

He will be forever remembered as the central figure in 'The Dismissal', perhaps the most ferocious political storm to ever hit Canberra, which resulted in him being sacked by Sir John Kerr on Nov. 11, 1974.

His dismissal was prompted by a refusal by parliament's upper house, the Senate, where his Labor Party did not hold a majority, to pass a budget bill until the government agreed to call a general election.

To end the impasse, Sir John took the unprecedented step of sacking Whitlam and installing then opposition leader Malcolm Fraser as caretaker prime minister.

For the first, and so far only, time in Australian history, the head of state used his constitutional powers to dismiss the government of the day.

Following the news of Whitlam's death, Federal Parliament was closed for the day as a mark of respect.