Australian PM challenges opposition over allegations

Australian Prime Minister Kevin Rudd today demanded opposition leader Malcolm Turnbull resign if he failed to produce an email at the heart of allegations that Rudd misled parliament.

The email relates to accusations Rudd sought special government treatment for a friend under a scheme to help struggling businesses find finance during the global financial crisis. The opposition has demanded both Rudd and Treasurer Wayne Swan quit over the affair.

The controversy comes at the mid-point of Rudd's three-year term in office, just as the government is struggling to drive legislation through a hostile upper house of parliament and amid speculation that Rudd might want an early election.

"If when parliament resumes in 24 hours, Mr Turnbull fails to produce this email, this email upon which his entire case against the government is based, for authentication he has no alternative but to stand in the parliament, apologize and to resign," Rudd said. "These are most serious matters."

The email allegedly came from Rudd's office, but the government says it has failed to locate the document on its computers and on Saturday called in police to investigate. Turnbull has denied he has a copy.

Turnbull today dismissed Rudd's demand as a "trick," and said the opposition would cooperate with the police probe, adding that the government clearly had questions to answer.

The row stems from Rudd's friendship with a Queensland car dealer and accusations that he asked Treasury officials to help the man's company gain access to a government program.

It is the first such storm to engulf Rudd personally since he won office in late 2007, and comes two weeks after the defense minister resigned over accusations that his office helped arrange meetings for his brother with defense officials.

However, Rudd remains well ahead in opinion polls, despite the slowing economy and political setbacks as he battles to push his program, including plans for an emissions trading scheme, through an opposition-dominated Senate.

Rudd would normally face an election in late 2010, but may have a trigger to go in December this year or early 2010 if the Senate continues to reject his carbon trade plan.

Rudd has previously told parliament his office did not ask Treasury officials to help the car dealer access to the OzCar scheme.