- Five weeks of campaigning starts before federal election September 7
- Incumbent Kevin Rudd faces challenge from Opposition leader Tony Abbott
- Rudd hoping to capitalise on honeymoon period with voters
- Newspoll puts Liberal coalition ahead, but Labor has made gains under Rudd
Australia's prime minister Kevin Rudd has called an election for September 7, kicking off a five-week campaign as polls show his ruling Labor party has dramatically closed the gap on the Liberal opposition.
The election will centre on the management of the A$1.4tn economy, which faces an increasingly uncertain outlook.
"This election will be about who the Australian people trust to best lead them through the difficult new economic challenges which now lie ahead -- new challenges brought about by the end of the China resources boom," Mr Rudd said in Canberra on Sunday, shortly after visiting Australia's governor general to seek permission to hold an election.
Mr Rudd was reinstalled as leader six weeks ago after ousting his predecessor Julia Gillard in a bruising leadership contest, Labor has closed the gap on the opposition led by Tony Abbott, a Rhodes scholar who trained for the priesthood.
By calling an election Mr Rudd is hoping to capitalise on a honeymoon period with voters and pull off an unlikely come-from-behind victory.
The widely followed Newspoll shows the centre left Labor party trailing the conservative Liberal coalition 48 per cent to 52 per cent -- a marked improvement on the 14 percentage point gap under Ms Gillard.
Since ousting Ms Gillard, Australia's first female prime, Mr Rudd, a former diplomat who is fluent in Mandarin, has sought to blunt opposition attacks by announcing a crackdown on asylum seekers, internal party reforms and changes to the country's unpopular carbon tax.
Mr Abbott built a strong lead in the opinion polls with a campaign to abolish the carbon and mining taxes, which he claims are responsible for job losses.
"There is only one way that Australians can be sure to leave the chaos, the division, the failures and the bloodletting behind for good . . . and that is to change the government," Mr Abbott said on Sunday.
His promise to turn back asylum seeker boats also proved popular with voters in key marginal seats in western Sydney.
Mr Rudd, who was dumped by his party in June 2010, has attempted to counter this with a hardline policy of his own, involving sending all illegal maritime arrivals to Papua New Guinea or the tiny pacific island of Nauru for processing and resettlement.
Mr Rudd has also been trying to frame the election as a choice between his economic policy of prioritising jobs and Mr Abbott's, which he says is a UK-style "slash and burn austerity drive".
This message was at the centre of Friday's economic update from Chris Bowen, the treasurer. A key Rudd ally, Mr Bowen said the government would let the budget deficit widen to A$30bn this fiscal year as Australia made the difficult transition to non-mining sources of growth.
"With the economy currently facing a period of transition and falling terms of trade, budget cuts in the near term to offset the lower than expected revenues would put growth and jobs at risk", Mr Bowen said.
Australia's economic growth has slowed and unemployment risen as the country's unprecedented resource investment boom has peaked. Interest rates have been cut to a record low but so far have failed to stimulate activity in the rest of the economy. Economists believe the Reserve Bank of Australia will cut rates further this week in an effort to support growth.