"Hot pursuit operations are going on in the hilly areas of Ipil," Philippine national police spokesman Director Felicisimo Khu said.
Local police chief Leopoldo de Asis told Armed Forces of the Philippines (AFP) there were concerns that Rodwell, 56, may have been injured during the abduction as bloodstains were found in his house.
"There was an empty (bullet) shell recovered and some blood. Maybe he struggled and someone fired but we do not know who was hit," de Asis said.
Kidnapping for ransom, often targeting foreigners, are common in the southern region of Mindanao, where Muslim separatist rebels, hardline militants and criminal gangs are active.
In Australia, Prime Minister Julia Gillard said a taskforce had been set up to work with Philippine authorities and that the government was providing support to Rodwell's relatives.
Australia also released an updated travel advisory repeating a warning for Australians to avoid the troubled southern areas.
Police and army chiefs said they were not yet sure who kidnapped Rodwell.
But provincial government spokesman Cris Llanos said suspicion had immediately fallen on the Al-Qaeda-linked Abu Sayyaf, a small band of Islamic militants that is blamed for the worst terrorist attacks in the Philippines.
The Abu Sayyaf, which is believed to have only a few hundred armed followers, was blamed for the abduction of a Filipina woman married to a British man in Ipil in September.
The military rescued her two weeks later on the Abu Sayyaf's stronghold of Basilan island, about three to five hours away by speedboat, during a gunfight in which one soldier died.
Many foreign governments have warned their citizens to avoid large sections of the southern Philippines because of the kidnapping threat.
This year, about nine other foreigners have been kidnapped in the south.
Four of them - a Chinese fish trader, a Filipino-American teenager, an Indian married to a Filipina, and a Malaysian lizard-trader - are believed to still be in captivity.
Three South Koreans pursuing mining ventures were also abducted in October.
Although they were released or rescued after more than a month in captivity, one of them died in a Philippine hospital this week from a stomach ulcer that was left untreated while in captivity, police said.
Rodwell settled down in Ipil about eight months ago with his Filipina wife, said Llanos, the provincial government spokesman.