"This says everything about the desperate and desperation politics on the part of the Liberal Party on the eve of the election," Rudd said.
Kelly said the leaflet was intended as an amusing send-up.
Howard was forced to distance himself from Kelly, who was a close colleague, and to defend his party from allegations of racism.
"I do not think that what has happened in the past couple of days in Lindsay could be evidence at all of some underlying racism in my party," he said. "These incidents are silly, unrepresentative and certainly don't reflect the mainstream values of my party."
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