The former member announced on Monday he has been endorsed as the seat's Labor candidate for the 2016 federal election.

Dr Kelly conceded Eden-Monaro in 2013, having held the bellwether seat since 2007, citing leadership instability and media influence as partial causes of the loss.

In a post on Facebook Monday morning, Dr Kelly said running for the south-east NSW seat would be "a hell of a challenge", slamming Mr Hendy's "ideological extremism and indifference".

"We know only too well what it is we are fighting against, exacerbated by the ideological extremism and indifference of the sitting member," he said.

"It hurts me deeply to see this seat in the hands of someone who simply doesn't care. Needless to say this is very motivating."

But in a mission statement, Dr Kelly highlighted a commitment to "campaigning based solely on policy issues and the performance of my opponents" and said he would "not engage in personal attacks, smear or underhanded tactics".

Dr Kelly said his attack on Mr Hendy was not personal, highlighting an Australian Chamber of Commerce and Industry discussion paper about government spending cuts, published in 2005 while Mr Hendy was chief executive of the organisation.

"The raising of the pension age, the cut to pensions, the attacks on family tax benefits, the cuts to the ABC and SBS, cuts to education and health, the GP co-payment, was all spelled out in a paper Peter Hendy produced as head of ACCI and he defended all of it," he said.

"It's an extremist ideology that we're seeing here and people in our regions dont like extremes to the right or left. 

Dr Kelly said he had thought long and hard about running again amid offers to work overseas.

Investment in renewable energy, the National Broadband Network rollout, boosting tourism and health were his priorities if elected.

Dr Kelly acknowledged the bellwether seat was "probably the toughest seat in the country in many ways".

"I have no illusions, having been through three campaigns here, how hard it will be. This is really a job application for both of us and its a question of whose going to do the job better."

Mr Hendy said he was disappointed Dr Kelly had "indulged in personal attacks".

"He said he wasn't going to indulge in personal attacks and smear and immediately called me an extremist," he said

Mr Hendy admitted the race for the bellwether seat would be tight but emphasised a swing against Labor at the last election.

"It's the same old candidate with the same old Labor policies. They were comprehensively rejected by the people of Eden-Monaro at the last election so, I don't know what new is being offered," he said.

"The bottom line is I've been doing my job on behalf of the people. I spend every week we're not sitting in parliament travelling the electorate.

"I've barely seen Mike Kelly in the electorate since the election. He thinks he can win by sitting back and hoping for the national swing to install him back into what he thinks is his rightful place. I don't think he's been working hard enough between the last election and now to warrant being elected."

Aside from national issues such as health, Mr Hendy said communication had been the number one issue raised by his constituents, particularly mobile black spots.

"Mobile black spots and the NBN were two things that were not addressed by the last government - there was a lot of talk of the NBN but not one customer was signed up," he said.

Mr Hendy said he'd also played his part in the development of a number of important services including the new south-east regional hospital in Bega and the Queanbeyan bypass.

Dr Kelly's announcement comes as he fights a Twitter defamation case in the Federal Court. Liberal strategist Mark Textor and former Liberal Party federal director Lynton Crosby are currently suing Dr Kelly for a tweet in October 2011 accusing them of introducing "push polling" to Australia.