CANBERRA - AUSTRALIA'S Prime Minister Kevin Rudd is facing his biggest political crisis over the coming week with rivals demanding he resign over abuse of power accusations and parliament to reject a key election promise.

Mr Rudd said on Monday that his centre-left government had been targeted in a 'farrago of lies' mounted by conservative opponents, who accused Mr Rudd and Treasurer Wayne Swan of doing favours for a car dealer friend who was also a political donor.

An email detailed in weekend newspapers appeared to back accusations that both Mr Rudd and Mr Swan misled parliament over government favours done for the car dealer to help him gain finance amid the global credit crunch.

'The problem is, no such email exists. It is false, it is fake, it is a forgery, notwithstanding the fact that that is the single piece of evidence,'Mr Rudd said, demanding conservative opposition leader Malcolm Turnbull resign or apologise.

As Mr Turnbull called for both Mr Rudd and Mr Swan to quit, police raided the home of a Treasury department official as part of an inquiry into whether an email had been deliberately forged.

The email appeared to have been 'concocted", but raised serious questions, conservative spokesman Joe Hockey told a special parliamentary session called to deal with the crisis.

The furore, while unlikely to force resignations, threatens to dent Mr Rudd's stellar popularity and claims of clean government, with an instant television poll showing 75 per cent of respondents doubted Rudd and Labor's version of events.

Despite coverage blanketing newspapers and television, the markets took no notice with few traders expecting either Rudd or Swan to fall victim to the crisis. -- REUTERS