CANBERRA - Labor leader Kevin Rudd lost the toss but won debate with John Howard, despite announcements from the prime minister on climate change and Iraq.
Mr Howard used the debate to promise a new fund to develop clean energy technology and help pensioners cope with higher energy bills.
And he announced that Australian and US military commanders in Iraq would begin talks within days on switching Australian troops from combat to a training role by the middle of next year.
But Mr Rudd overcame a nervous start to score points against the Prime Minister on education, health, tax cuts, interest rates and industrial relations.
Watched by virtually all the coalition frontbench and a host of Labor rank-and-file, Mr Rudd accused the Prime Minister of short term thinking while Mr Howard slammed the opposition leader as a pessimist.
But the stilted 90-minute debate - broadcast live on Sky News, the ABC and the Nine Network, complete with "the worm" audience reaction monitor - came to life when the two leaders began talking about education.
Treasurer Peter Costello was reprimanded for interjecting from the floor as Mr Rudd and Mr Howard traded insults over an OECD report which found education funding had gone backwards under the Howard government.
Mr Howard called Mr Rudd dishonest, saying the report did not take HECs arrangements into account, nor did it include the proposed Higher Education Endowment Fund and the recent investment in vocational skills colleges.
Mr Rudd hit back, accusing Mr Howard of having done nothing in his 11 years in power.
"No, that's pathetic," Mr Howard said.
"You were wrong and you knew it and you shouldn't have said it."
Mr Rudd refused to withdraw, saying: "Mr Howard, I stand by everything the OECD has said, it's not the Labor party."
He accused the Prime Minister of short-term thinking, saying working families were looking for a new direction.
"I have put before the Australian people a long term plan for the nation's future," Mr Rudd said.
"I fear Mr Howard has put before them a short-term strategy to win the election."
But Mr Howard said he had an optimistic view of Australia's future, whereas Mr Rudd was a pessimist.
They traded blows over economic management, each accusing the other of pushing up interest rates.
Mr Howard declined to apologise for the five rate rises since he campaigned on a promise to keep interest rates low in 2004, while Mr Rudd refused to promise that rates would not rise under a Labor Government.
But Mr Howard urged voters to continue on the path of economic growth and denied that there was a need for new leadership.
Mr Rudd did not use many of his trademark turns of phrase, disappointing viewers who were playing along with a Liberal Party bingo card of almost 40 Ruddisms, including "when it comes to", "in due season" and "when I travel around the country".
Mr Howard defended his promised $34 billion in tax cuts, saying they were "eminently responsible".
"And to say to the average Australian family, we have an enormous budget surplus and we're going to in their eyes hoard it and not hand any of it back to them, despite the fact that even in this very strong economy there are cost of living pressures is to be unrealistic and is to misunderstand the incentives and attitudes of ordinary Australians," he said.
Mr Rudd disputed coalition claims that Labor routinely produced budget deficits, saying that Mr Howard had presided over five budgets as treasurer - four of them in deficit.
"We have all learnt from the mistakes of the past," he said.
Feeds