OzCar back to bite Turnbull

CANBERRA - Opposition Leader Malcolm Turnbull's grip on his party has come under further pressure from damning reports on the OzCar fiasco that earlier blunted a tentative recovery in his political fortunes.

Turnbull fell on his face after demanding the resignations of Prime Minister Kevin Rudd and Treasurer Wayne Swan for allegedly pressuring officials to give a friend and political supporter special access to emergency federal finance for embattled car dealers.

The demand was based on evidence to a Senate inquiry by the man in charge of the OzCar scheme, Treasury official Godwin Grech, and an email of unknown origin later shown to be a fake.

Yesterday Grech, now a patient at a Canberra psychiatric unit, revealed in the Australian that he was the author of the email, written in a bid to ensure Opposition support for the legislation needed for OzCar to begin operating.

He said he had shown a printed copy of the fake email to Turnbull and Liberal Senator Eric Abetz "under tremendous pressure" but had not given permission for its use.

Grech did, however, provide a list of questions for Turnbull to use against Rudd in Parliament.

The email's contents were also leaked to a journalist, and its text was read by Abetz during Grech's Senate testimony.

Grech's admission came as the Auditor-General, Ian MacPhee, released the report of his investigation into the allegations of special treatment for Brisbane car dealer John Grant, a friend of Rudd.

The report cleared Rudd and Swan of trying to pressure Grech into giving Grant privileged access to the scheme set up to provide finance to dealers hit by the withdrawal of overseas financiers as a result of the global financial crisis.

But it found Grech's response to representations from other car dealers varied widely, and that he had given preferential treatment to one who was understood to be a Liberal supporter.

Political commentators have warned that Grech's revelations could greatly damage Turnbull, whose hold on the Opposition leadership is already shaky.

"The real problem for Turnbull is no longer a failure of political judgment over the use of what turned out to be a fake email to call for Rudd's resignation," the Australian's Dennis Shanahan wrote.

"Rather, it is that Grech claims the Liberal leader had intimate involvement and direction in the coaching of a senior Treasury official in the leaking of the material."

The Government has used the reports to again demand Turnbull's resignation.

Turnbull confirmed he met Grech one week before his Senate testimony, had been shown a copy of the fake email, and had been given a list of proposed questions for Parliament, but disputed other claims made by Grech in the Australian.

He said the Opposition had at all times acted in good faith. "It is very regrettable that in doing so Mr Grech misled the Opposition, the Parliament and the Australian people."

Opinion polls have tracked a decline in the standing of both Turnbull and the Opposition.

Last week's Newspoll said Rudd's lead over Turnbull as preferred prime minister had widened since May.