SYDNEY: Shock waves from Spain have been felt by the government of America's closest non-European ally, Australia. Until recently, John Howard's conservative coalition had been coasting along, quietly expecting that its eight-year life would be extended by a buoyant economy, its robust stance on Iraq and terror issues, and the opposition Labor Party's lack of ideas and leadership.

But all of sudden, the rightist government here looks to have the potential to follow its Spanish counterpart. Howard is widely expected to call an election later this year - and before November if his comrade-in-arms, President George W. Bush, is looking vulnerable.

Spain and the violent drift of events in Iraq have exposed a major policy divide in Australia, perhaps the deepest to have emerged since Labor opted for free-market economics 20 years ago. It centers around foreign policy.

That is seldom an election-winning issue here, any more than elsewhere. Domestic issues will dominate, but in a tight race the foreign issues could tip the balance. Unease over Iraq is coming at a time when the public appears to be tiring of Howard. He is a skillful politician but he is now 63 and has been in office for eight years - like his fellow conservatives in Spain. Unlike Prime Minister José María Aznar, however, Howard has resisted passing the leadership to a younger generation.

Meanwhile, a long-moribund Labor Party has regained a sense of purpose with the election of a young, combative leader, Mark Latham, 43. It also has an articulate, Chinese-speaking former diplomat, Kevin Rudd, as its foreign affairs spokesman. He is quite capable of taking on Alexander Downer, Howard's foreign minister, who is experienced but often sounds like a school prefect.

The comparison with Spain is not exact. There was never the same degree of popular hostility in Australia to involvement in Iraq. The reliance on America is greater and Australia's losses in the Bali bombing created a climate favorable to a hard-line policy on anything labeled terror. Labor opposed following the United States into war, but once Australian troops were committed, it was careful not to appear unpatriotic. Nor has the question of sufficient evidence of weapons of mass destruction to justify war been as big an issue here as in Britain.

However, events in Spain have raised the question of whether Iraq involvement has made Australia more vulnerable to terror. There has been a public row between Howard and the police chief on this very point. Whatever the case, deeper misgivings about Australia's role in Iraq have surfaced.

Unease over Iraq also fits with another plank of Labor foreign policy - to pay more attention to Asia. The party is still assessing the net benefits of the recently concluded U.S.-Australian free trade agreement. But there is little doubt either here or among international trade experts that on both sides the deal has been driven mainly by strategic considerations. Local critics say it is a surrender to U.S. sugar interests, and foreign critics see both a betrayal of Australia's friends in the Cairns Group of agricultural exporters and a signal that Australia's priorities are not in Asia.

It is no secret that Howard and Downer are about as popular in southeast Asia as Bush and Donald Rumsfeld are in Europe. Bush's 2003 comment about Australia being America's "sheriff" in the region will rankle for a long time in Asia. But apparent subservience to America has done no harm to relations with China, which has signed natural resource deals that should help underwrite Australia's prosperity for many years.

Meanwhile, one aspect of the Howard-Downer foreign policy looks to have been a success, at least for now. Successful intervention to restore calm to the chaotic Solomons has been well received by the Pacific nations. In Australia there is bipartisan support for more active backing of the small nations in Melanesia and Polynesia, which have problems arising from size, distance, governance and the rape of their resources by Asia's highly organized logger barons and fish pirates.

Nor has Howard been fatally weakened at home. The economy continues to outperform most of the OECD, and Howard has been adept in the past at playing on the gut pro-Americanism and the worries about Asia that run deep with the electors. In the 2001 election, he exploited fears of a refugee influx with tough policies that outraged many but sparked a stunning recovery in Liberal fortunes. He could do so again.

But for now, a combination of the Iraq effect and a sense among the electorate that it's time for a change make it a distinct possibility that the White House will lose another foreign friend before the year is out.