ELECTION PITCH: Mr Howard listing the achievements that his government has made in an address to the National Press Club in Canberra yesterday. His Liberal Party has been trailing Labor in the polls. -- PHOTO: AFP

The flyer, purporting to come from the non-existent Islamic Australia Federation, was dropped into letterboxes in a key Sydney seat two days before tomorrow's elections.

It bore Labor's logo with a message thanking the party for supporting those convicted over the 2002 Bali bombings, which killed 202 people, including 88 Australians, and for allowing a controversial Muslim cleric into Australia. It also claims Labor wants mosques built in Sydney.

Mr Howard's Liberal Party, which has been trailing behind Labor in the polls, said it had suspended two members over the hoax.

'I condemn it, I dissociate myself from it. It is no part of my campaign and the party has acted promptly to deal with it,' Mr Howard told local radio.

He refused to name the suspended members, but ABC said they were Mr Gary Clark, husband of Liberal Member of Parliament Jackie Kelly, and New South Wales state's Liberal executive member Jeff Egan.

Mr Egan categorically denied issuing unauthorised material, but Mr Clark, whose wife is retiring at the elections, admitted distributing the leaflets but insisted that neither his wife nor her would-be Liberal successor had advance knowledge of his plans.

The furore follows controversy about small numbers of Islamic extremists in Australia's 400,000-strong Muslim community.

Far-right politician Pauline Hanson, who a decade ago called for a ban on Asian immigration, is now campaigning for a freeze on Muslim migrants.

On the flyer, Australian Federation of Islamic Councils president Ikebal Patel said: 'My first reaction was 'Oh no, not again, not the Muslims again'.

'At such a late stage in the election process, to bring something like this up in a fake flyer going around is really quite despicable.'

He demanded a police investigation.

Mr Patel also said he was insulted that the name chosen for the bogus Islamic group closely resembled the name of his own federation.

The minority Australian Democrats accused the government of resorting to 'bigotry and fear-mongering' to stave off defeat.

The bogus pamphlet applauded Labor for supporting bombers 'unjustly' sentenced to death and praised the party for allowing a controversial Muslim sheikh, who compared immodestly dressed women to uncovered meat, to live in Australia.

'We gratefully acknowledge Labor's support to forgive our Muslim brothers who have been unjustly sentenced to death for the Bali bombings. Ala Akba,' it said.

The damaging row looked likely to overshadow a televised address to the nation by Mr Howard later yesterday.

With Labor needing to pick up 16 seats for victory, Ms Kelly's seat may prove vital in an election likely to rest on outer Sydney electorates where many home owners have been hurt by successive interest rate hikes.

Labor leader Kevin Rudd accused Mr Howard, who is seeking re-election for a fifth term, of 'desperate and desperation politics'.

'This is extraordinary. Their negative fear campaign is now being run out to people's letterboxes,' he said.

REUTERS, ASSOCIATED PRESS, AGENCE FRANCE-PRESSE