"Both major political parties are rattling around at the bottom of the barrel trying to find something derogatory they can say about the other party," Mr Fraser told The Age. "I believe at the moment they would use any issue if they think there's a vote in it."

Now in his early 80s, Mr Fraser, singled out former Liberal leader John Howard on the issue of asylum seekers, accusing him of demonising people arriving in Australia on boats for political gain.

Mr Fraser, Liberal prime minister from 1975 until 1983, said the Australian Labor Party had also succumbed to a populist desire to match the Liberals on border protection and had shifted the public's thinking on the issue.

He said many people now had a "totally toxic and false view" of the problem of asylum seekers because of politicians' rhetoric. "At heart, I don't believe the great majority of Australians are racist, but the Government has behaved as though we are."

Mr Fraser said Australia's leaders had further damaged our reputation by making grave mistakes in the area of foreign affairs, choosing to kowtow to the United States — most recently over the issue of additional American military deployments to our region in a hawkish response to a strengthening China. Mr Fraser said Australia should be arguing the case for a diplomatic rather than military response.