CANBERRA – Australian's conservative opposition called on Prime Minister Kevin Rudd to resign on Friday over accusations he misled parliament and sought special government treatment for a car-dealer friend.

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.

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

This is a shocking abuse of power and a betrayal of public trust, Opposition Leader Malcolm Turnbull said, adding Rudd had misled parliament on the issue and should resign.

The political row is the first to engulf Rudd personally since he won office in late 2007, and comes two weeks after the resignation of the defense minister 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, which was set up to help struggling dealers find finance during the global economic crisis.

A spokeswoman for Rudd told Reuters the prime minister stood by his previous comments on the issue.

But a senior Treasury official on Friday contradicted Rudd, telling a parliamentary hearing he believed Rudd's office had contacted him to seek help for the car dealer, John Grant.

It was certainly my understanding that the initial contact I had with respect to John Grant was from the prime minister's office, said official Godwin Grech, who is responsible for the OzCar scheme.

But what did I do with that representation? I did nothing with it.

Grech said a thorough search of Treasury records and emails found no sign of any contact with Rudd's office over the car dealership.

Treasurer Wayne Swan earlier said suggestions Rudd had made representations to Treasury officials on behalf of the Queensland car dealer were ridiculous.

The PM has made this very clear: there have been no representations by the Prime Minister or his office on behalf of Mr Grant, Swan told reporters in Canberra, adding allegations from the opposition were part of a shabby smear campaign.

(Editing by John Chalmers)

Australia