Australia's ruling Labour leads ahead of election - poll

CANBERRA (Reuters) - Australian Prime Minister Julia Gillard on Monday took a narrow lead into the final two weeks of an election campaign which will decide the fate of a controversial new 30 percent mining tax.

Gillard's campaign has struggled over the past two weeks due to divisions within the ruling Labour Party over the dumping of former Prime Minister Kevin Rudd in June, and some polls show opposition leader Tony Abbott could win office on August 21.

But the latest Newspoll in the Australian newspaper on Monday gave Gillard's Labour a four point lead, with the government on 52 percent compared to 48 percent for the conservative opposition.

"What it shows is that the electorate is I suppose a bit volatile. The polls will go up and down," Abbott told Australian television.

"I think I've always been the underdog in this campaign."

The latest Reuters Poll Trend shows Australia is facing an increasing risk of the first hung parliament since World War Two, while Saturday's Nielsen poll showed the government trailing the opposition by 49 to 51 percent and headed for defeat.

The Newspoll found the government's vote had improved two points in a week on a two party basis, while the opposition's support had fallen two points.

Gillard also remains preferred prime minister with 49 percent support compared to 34 percent for Abbott.

The government has proposed a 30 percent tax on big iron ore and coal mines in Australia, affecting companies such BHP Billiton, Rio Tinto and XstrataL>, which have agreed to the tax plan.

But smaller mining companies remain angry about the scheme and Abbott has promised to abandon the tax if he wins office.

Gillard, who saw her once commanding poll lead disappear after a string of campaign blunders, met her ousted predecessor Rudd at the weekend to ask him to support the party's campaign in marginal seats.

Voter discontent over how Rudd was dumped by the party earlier this year, and damaging leaks about the ouster, have contributed to Labour's difficulties and Gillard hopes a truce with Rudd would lift Labour's hopes.

Abbott officially launched his campaign on Sunday, pledging tougher prison sentences for people-smugglers and a united team if he wins office -- pointing to dissent within Labour since Gillard replaced Rudd.

Illegal immigration is shaping up as a decisive issue, with opinion polls showing that voters in marginal seats are concerned that Canberra is not doing enough to turn back boatloads of asylum seekers.

Labour under Rudd won power in November 2007. No Australian government since 1931 has lost after a single term.

(Reporting by James Grubel; Editing by Michael Perry and Andrew Marshall)