The Federal Opposition is on the back foot as leader Malcolm Turnbull concedes that accusations the Prime Minister was involved in the OzCar affair cannot be sustained.

The Federal Government is demanding Mr Turnbull apologise and step down for accusing both Kevin Rudd and Treasurer Wayne Swan of seeking favours for a friend, car dealer John Grant, and misleading Parliament about it.

A disputed email Mr Turnbull questioned Mr Rudd about has been found to be a fake by the Federal Police.

"The case that Mr Rudd misled the house about the communication is not sustained," Mr Turnbull told AM.

"There is no doubt about that."

Mr Turnbull has reiterated that the Liberals had nothing to do with creating the fake email.

"It was not created or composed by us. If it is a fake as is apparently the case, it was a fake that was created in the Treasury," he said.

"Now how on earth can I be responsible for a fake that is created in Mr Swan's Department?

"It is absurd for Mr Rudd to say it is a question of my character that a senior official has, so it is alleged, created a fake email.

"Now, if that is the case that raises an issue for a senior official. It doesn't raise an issue for us."

But Mr Turnbull says the Opposition acted "reasonably and responsibly" by asking the PM to explain himself and basing its accusations on evidence a Treasury official - Godwin Grech - gave to a Senate inquiry on Friday.

"Mr Rudd should apologise to me for accusing us of fabricating an email," he said.

"We were entitled to rely on what he (Grech) said, but if he's wrong then the case against Mr Rudd is not there."

Mr Grech is in charge of the Government's OzCar scheme and gave key evidence about the scandal to a senate inquiry on Friday.

Mr Grech told the inquiry he recalled receiving a short email from the Prime Minister's office asking him to assist Mr Grant, a friend of Mr Rudd's who had supplied the PM with a ute.

Mr Turnbull says there is now doubt about Mr Grech's evidence.

"If the email that has turned out to be a fake, that raises huge questions over that, the basis of that," he said.

"Having said that, everything we did, we acted reasonably and responsibly on it. We had no reason to believe that Mr Grech was not telling absolutely the truth."

"He is a very senior Treasury official. A person in whom the Government, Mr Rudd and Mr Swan have placed considerable trust so we were entitled to rely on what he said but if he is wrong then the case against Mr Rudd is not there."

Despite the setback Mr Turnbull is still pursuing the Treasurer over the OzCar affair, saying Mr Swan did give special treatment to Mr Grant and that is plain from the emails tendered to the Senate.

Mr Turnbull says the spotlight should stay on Mr Swan.

"What Mr Rudd is trying to do is to divert attention from the fact that Mr Swan unquestionably misled the Parliament," he told AM.

"He did give special treatment to Mr Grant. He did use the leverage of the Federal Government over Ford Credit when it was desperately seeking $500 million in order to survive so that Mr Grant could secure an advantage and that is plain from ... the emails that are not in contention that have been tendered to the Senate by the Treasury."

Hockey rings Grech

Meanwhile, Opposition treasury spokesman Joe Hockey has revealed he rang Mr Grech at the weekend.

Mr Grech worked for Mr Hockey for a short time several years ago, but Mr Hockey says he hasn't spoken to him for about two years.

He says he tried to get in touch with Mr Grech on Saturday.

"I sought out his mobile phone number and rang and left a message to say 'I hope you're OK, take care of yourself' and that is the only time I have attempted to contact him in years," he said.

Based on an interview by political correspondent Lyndal Curtis for AM.