Knives sharpened in battle for Oz

Back in the day - and not so long ago - Julia Gillard and Tony Abbott ran a regular double act on breakfast television, swapping barbs and sometimes even a cuddle or two.

Not now. Both have blood on their hands, knifing their leaders to take the helms of the nation's two major political parties.

Gillard will soon call an election that will determine if she is to continue as Australia's first female prime minister, or add another - less welcome - notch to her belt: the first leader in 80 years not to take her party to a second term.

Hers would also be the fifth-shortest prime ministership in Australia's history, behind the one year, nine months racked up by Sir Arthur Fadden until two independent MPs holding the Government in power scuttled his budget in 1941.

On the other side of the House, Opposition leader Abbott has the chance to become a true conservative hero, taking the Liberals from near-ruin eight months ago back into power. Or if, at the last moment, voters stampede to Labor, he could be the goat.

Picking just when Gillard will call the election has become a national sport. internet betting agencies are running crowded books on the date, and the media are churning through the political entrails looking for omens.

Last weekend we were warned to expect an announcement following leaked Labor Party emails in rural Victoria. This weekend we were put on notice by reports that federal Labor candidates and campaign workers had been summoned to an urgent meeting in Sydney today.

As it stands, August 21 and 28 remain the two favourites, especially as Gillard now has only one more big-ticket item to check off her must-do list before naming the day.

Within a week of ousting predecessor Kevin Rudd, she had reached a deal with Australia's biggest miners over the resources tax that had finally doomed the man who ended John Howard's 11 years, eight months and 22 days in power, a run eclipsed only by the 16 years of Liberal titan Sir Robert Menzies.

This week she ticked off asylum seekers with a new hard-line policy that promises a return in form - if not name - to Howard's "Pacific solution" of holding boat arrivals on foreign shores until their status as refugees is accepted or refused.

Now Gillard is turning to the environment, and a fill-in policy she hopes will give Labor sufficient traction on climate change to make voters forget the party's backflip on an emissions trading scheme and accept her promise that, when the global political planets are in line, she will put a price on carbon.

Abbott, meanwhile, has been firing off salvos from the right flank and having a ball with the nasties that keep crawling out from beneath the Government's rocks.

Though the odds remain with Gillard, there are sufficient swinging voters in sufficient marginal seats to give him hope.

The national polls that swung behind Gillard after her coup pushing Labor back into a solid lead, could be deceiving: a uniform national swing of 2.3 per cent would put Abbott in power, with real potential problems for the Government in marginal seats in Queensland, New South Wales - especially in Sydney's western suburbs - and Western Australia.

Polling of key marginals by Morgan in the last week of June, just after Gillard's coup, showed Labor could lose five seats in NSW and Queensland, with another in the balance in WA.

Since she became prime minister, Gillard has been plugging Labor's most serious holes in a bid to stem any real exodus on polling day, tackling the big three first - the miners' tax, asylum seekers and climate change - while pulling her other policies into new election wrapping.

On the miners' tax, she has achieved a deal Rudd could not reach, but not without pain. Gillard made major concessions - opening herself to taunts of "backflip" from Abbott - that are now starting to bite back.

Smaller players who argue there is little for them in the package are making a lot of noise.

Worse for Gillard, the headlines in recent days have all been bad, reporting estimates from within the bureaucracy that indicate that rather than costing the Government A$1.5 billion ($1.86 billion) in revenue as Treasurer Wayne Swan predicted, the real loss will be billions more.

That has two effects - first, undermining Gillard's credibility and, second, putting at serious risk a whole range of measures central to the Government's economic strategy.

Nor has Gillard's new policy on asylum seekers been all that she would have hoped for.

This is a real gut-wrencher for many voters, especially for the low-paid, unemployed and insecure, who research has shown have linked the surge in boats under Labor with population projections of more than 30 million within a few decades.

Gillard addressed this in her policy speech, emphasising the relative handful of refugees who arrive by sea, and the need to more broadly manage population growth while fulfilling Australia's moral and humane obligations.

"We are very roughly the same size as America and we are a great country like America," she said. "But we are not America. We do not have the inland sprawling plains, fertile soils and cities for that kind of population.

"In many faster-growing parts of Australia ... people would laugh if you told them population growth was intended to improve living standards. People in these communities are on the front line of our population increase and they know that bigger isn't necessarily better."

Gillard also invoked her own background as a Welsh migrant: "Hardworking Australians who themselves are doing it tough want to know refugees allowed to settle here are not singled out for special treatment. People like my own parents who have worked hard all their lives can't abide the idea that others might get an inside track to special privileges."

But though her policy of further beefing up border controls in concert with other countries in the region might appeal, the central element of a new camp abroad to process asylum seekers without allowing them near the mainland is in danger of unravelling.

Amid outrage from refugee advocates at a return to the "Pacific solution" and hoots of "hypocrite", "copycat" and "bungler" from the Opposition, Gillard is now having to step back from her initial suggestion of a centre in East Timor.

Although Dili has not rejected the proposal, her plan has unleashed a wave of anger there. Still hoping for the best, Gillard is now saying she had not specified East Timor - a careful reading of her speech confirms a hair-splitting choice of words - and that other host countries could be considered.

On climate change, Gillard has confirmed she will be announcing a new policy within days, and it will not include an ETS or any other form of carbon pricing before at least 2013.

Instead, she appears likely to focus on new renewable energy programmes and energy efficiency.

The Opposition has gleefully noted similarities to its own climate change strategy, and has further jumped on new revelations of allegations of corruption within the Government's A$175 million ($216.5 million) green loans scheme, set up to encourage household energy savings.

Abbott can add this to the pot-full of examples he already has of bungling and corruption in home insulation and education construction.

He is linking this to claims of excessive spending under the economic stimulus plan launched to stave off the global financial crisis, in a bid to undermine Labor's economic management.

But, though polls still show that most voters believe the Coalition to be better economic managers, Gillard has numbers on her side.

This week provided more evidence of strong employment growth, coupled with the Reserve Bank's decision to stave off a further interest rate rise - although another could occur before the election.

But Swan continues to pump the fact that Australia came out of the GFC stronger than any other developed country, and is continuing to expand at a pace he says is "leagues ahead" of nearly all advanced economies.

Gillard's job is now to convince enough voters she deserves a full term as prime minister.