Inquiry clears Australian PM of influence peddling

The auditor-general's office launched an investigation after the email surfaced that appeared to show Rudd's staffers lobbying officials on behalf of a car dealer, John Grant.

This was seized on by opposition leader Malcolm Turnbull, who in June demanded Rudd and Treasurer Wayne Swan resign over the affair, only to find his own position under threat after police confirmed the email was a forgery.

The Australian newspaper reported Tuesday that a senior public servant had admitted to making up the email and supplying it to Turnbull.

Treasury official Godwin Grech allegedly made the confession from a psychiatric ward where he was voluntarily admitted suffering depression shortly after the scandal broke, the newspaper reported.

Grech said he concocted the email because Turnbull and other members of the conservative opposition were pushing for documentary proof of his claims that Rudd's office had sent an email putting pressure on the Treasury.

"It is at this point that I made an error of judgement," he told the newspaper.