The Australian opposition has widened its lead over Prime Minister John Howard's conservative government, opinion polls suggest.
Mr Howard is feeling the heat from Iraq
"We are in the fight of our political lives," Mr Howard told party colleagues on Tuesday, ahead of an election expected later this year.
Mr Howard admitted that the negative publicity from the war in Iraq had harmed the government's popularity.
The latest poll suggested a majority now feel the war was not justified.
A close US ally, Mr Howard sent 2,000 troops to the military invasion in Iraq last year, and for the first time, opinion surveys suggest his popularity is being hurt by that decision.
Mr Latham warned his colleagues against complacency
"Iraq has been a negative for us," a government spokesman reported Mr Howard as saying. "The odds are very much against us," he told a meeting of coalition MPs and senators.
But he said there would be no change in the government's position.
An AC Nielsen poll for the Sydney Morning Herald and The Age newspapers found that in a two-party survey, Mark Latham's Labor party led the government by 56% to 44%, up six percentage points from a similar poll in February.
Labor is now in the best election position since May 2001, according to the Sydney Morning Herald. However, on that occasion, the Howard government went on to win the election six months later.
The poll also found that 63% thought the war in Iraq was not justified, compared with 51% in September last year.
The US-led mission in Iraq has been mired by allegations of widespread prisoner abuse in Abu Ghraib prison, and continuing attacks on occupying troops.
The Australian military said on Tuesday they were investigating whether a blast in Baghdad which injured five Iraqis was aimed at Canberra's embassy nearby.
In addition to the Iraq issue, Mr Latham's approval rating appears to have been lifted
by a voter turnaround in his home state of New South Wales, particularly among women.
Mr Latham, who was only appointed as Labor's leader last December, has made his stance against Iraq a key election issue and has pledged to have all Australia's troops home by Christmas.