The Coalition can still win the next election, the Prime Minister told a standing room only meeting of Government staffers yesterday morning.

Peter Costello, Nationals’ leader Mark Vaile and Liberal federal director Brian Loughnane also briefed the troops. The gee-up worked. Morale has been better in the government all week. Not that either side looks particularly good after yesterday’s uproar. Ministerial minders were pushing a ridiculous line – that Labor leaked the story of Kevin Rudd’s heart procedure to kill the tax slip story.

But Labor did itself no favours. Kevin Rudd handled the heart story well when he joked yesterday morning that Arnold Schwarzenegger has had the same surgery. Then he went a bridge too far, raising allegations of a smear campaign. The Government fought back. And by the end of the day we had seen the Labor leader lose his cool.

A hard played game ended up in a nil-all draw. “The heart story, plus that f-ckwit blabbermouth Alexander Downer and that madman Phelps ended up diluting the tax error,” a government source told Crikey yesterday. But all is not lost.

“We still have the vision and audio of Rudd stumbling,” they added.

“That’s gold for the wall of adverts on their way.”