Howard rocked by smear scandal as defeat looms

John Howard, Australia's Prime Minister, was fighting for his political life yesterday as details emerged of an attempt by senior members of his Liberal Party to smear the opposition Labour Party and whip up anti-Muslim feeling in a key marginal seat.

Mr Howard, who wanted to spend the penultimate day of the election campaign convincing voters to re-elect his Liberal-National Coalition government tomorrow, instead faced repeated questioning about a bogus leaflet distributed in the name of a non-existent Muslim organisation, the Islamic Australia Federation, in the Sydney seat of Lyndsay.

The pamphlet called on voters to support Labour, which, it said, had forgiven "our Muslim brothers who have been unjustly sentenced to death for the Bali bombings". It also claimed that Labour backed a radical Muslim cleric who has described scantily clad women as "uncovered meat", and supported plans to build a mosque in the area, in Sydney's outer western suburbs.

At first, the Liberal Party blamed the leaflet on maverick volunteers. But it quickly emerged that those behind it included the husband of Mr Howard's candidate in Lyndsay, Karen Chijoff, and the husband of the retiring Liberal MP, Jackie Kelly. Both men resigned their party membership yesterday, and a senior member of the New South Wales state executive, Jeff Egan, was expelled.

The revelations of dirty tricks could not have come at a worse time for Mr Howard, with the opinion polls consistently predicting defeat for his government after 11 years in power. Yesterday, he tried to invoke a feminist argument to defend Ms Kelly and Ms Chijoff, claiming the days were long gone when wives were privy to everything their husbands were up to.

Ms Kelly is a former minister in Mr Howard's government, and a favourite of the Prime Minister. She denied all knowledge of the leaflet, as did Ms Chijoff – although senior Labour figures claimed the leaflets were produced and distributed from Ms Kelly's house, and her husband, Gary Clark, admitted that he had produced them. He and Ms Chijoff's husband, Greg, were caught dropping the flyers into letterboxes on Tuesday night after Labour campaign workers received a tip-off, reportedly from a disgusted Liberal.

The affair overshadowed Mr Howard's final address to the nation yesterday, delivered to the National Press Club in Canberra. He called it "an unauthorised document ... tasteless and offensive". Visibly frustrated by repeated questions on the subject, he said: "It does not represent my views."

The Labour leader, Kevin Rudd, said: "After 11 years, all the Liberals have left to offer is negativity, desperation and dirty tactics."

The episode dominated the front pages yesterday, and led the radio and television bulletins. The Daily Telegraph, a Sydney tabloid, ran a full-page photograph of Mr Clark hiding his face behind one of the leaflets, which concluded with the misspelt phrase "Ala Akba" (Allahu Akbar – God is great.)

Ms Kelly claimed that the pamphlets, which carried a fake Labour logo, were an amusing prank, and said her husband had been "skylarking" after a few beers. She accused Labour of intimidating the leafleting Liberals, saying: "An ALP [Australian Labour Party] goon squad ... have chased down and hunted down and tried to intimidate. I understand there was even a fight."

The Liberals are under enormous pressure to retain Lyndsay, one of 16 marginals that Labour needs to win in order to form a government. The redrawing of electoral boundaries has reduced the Liberal majority in the seat to 2.8 per cent.

Lyndsay also has a symbolic significance. Its suburbs are home to "Howard's battlers" – the aspirational working-class people who had voted for Labour but placed their trust in the coalition, helping Mr Howard to win power in 1996 and then triumph at three subsequent elections.

Ms Kelly was elected to parliament in 1996, and seemed to embody the voters' change of mood. She once turned down more funding for the University of Western Sydney, in her seat, declaring: "No one in my electorate goes to uni."

Now her constituents, many of them young families who took out large mortgages, are suffering, thanks to rising interest rates, falling house prices and workplace reforms that have undermined their pay and working conditions. If Mr Howard is defeated, it will be because the battlers have turned against him.

The Australian Electoral Commission is investigating the affair, and has also referred it to the Australian Federal Police. Mr Howard denied the pamphlets demonstrated racism within his own party.

An opinion poll in today's Sydney Morning Herald puts Labour 14 points ahead of the ruling coalition.