Australia's Howard stumbles on rates in election

CANBERRA, Oct 16 (Reuters) Australia's conservative Prime Minister John Howard, struggling to win a fifth term, suffered an embarrassing setback when he misquoted official interest rates, slipping up on an issue central to his campaign.

In a television interview last evening, Howard incorrectly said official interest rates were 6.25 percent instead of 6.5 per cent, prompting Labor to accuse him of being out of touch on a key issue for the November 24 election.

''I'm human, like everybody else,'' Howard told Australian radio today. ''The people of Australia will judge me on my economic competence according to how I've handled the Australian economy over the past 11 and half years.'' The slip forced Howard, who is well behind Labor in opinion polls, to defend his policies on the second official day of campaigning, blunting his attempts to sell the benefits of A billion ( AUS 30 billion dollars) in income tax cuts promised yesterday.

Interest rates are a sensitive political issue in Australia, where home ownership is a national obsession and where key marginal seats on the outskirts of the major cities are full of voters paying off their home loans.

Howard's economic management and his government's determination to keep interest rates low have been key planks of his 11 years in office, with Howard warning rates would be higher if the centre-left Labor Party won power.

Howard won his fourth straight election in 2004 after promising to keep interest rates at record lows, but the central bank has lifted rates by 0.25 basis points five times since then, with the last rise in August.

Last month, Labor leader Kevin Rudd was caught out when he did not know the current tax rates, prompting the government to criticise his knowledge of Australia's economy.

Labor, which needs to win 16 more seats to win power, has promised conservative economic management by keeping a tight rein on spending and promising to maintain a strong and independent central bank to decide on interest rates.

Meanwhile, Howard spent day two on the hustings visiting a timber windows factory near Canberra to promote his tax cuts promised over four years, announced on Monday as the first big election pledge.

But factory workers were divided on whether they would vote for Howard, citing concerns over rising interest rates and the government's new labour laws, which weaken workplace unions.

''There is support in the office, but out the back here not so much,'' carpenter Aaron Steele, 23, told Reuters.

Factory owner John Barilaro, a staunch government supporter, said Howard faced a tough battle to win over Labor in the six- week campaign, with Rudd well ahead in opinion polls.

Rudd spent the day in Sydney's outer suburbs where he announced plans to release more government land for housing development to ease the shortage of affordable housing.

Australia's central bank board meets again on November 6, with markets pricing in an even chance that it will raise rates the next day due to strong growth and inflationary pressures.

REUTERS SS AS1131