Obama hits back at McCain’s ‘smear campaign’

Barack Obama has accused his Republican rival John McCain of a smear campaign, saying that he is more interesting in bringing the Democratic candidate down than fixing up the US economy.

Obama hit back over accusations on Saturday by Sarah Palin in which the Republican vice-presidential candidate said he was "palling around with terrorists". Palin was referring to Obama's acquaintance with Bill Ayers, a former member of the Vietnam War-era militant Weather Underground.

"They'd rather try to tear our campaign down than lift this country up," the Democratic presidential candidate said at a rally in Asheville, North Carolina.

"It's what you do when you're out of touch, out of ideas and running out of time," Obama told the crowd of 20,000 on Saturday.

Yesterday the Obama camp unveiled an ad highlighting McCain's role as one of the 'Keating Five' senators who met federal regulators on behalf of a California savings and loan institution that collapsed in 1989.