CANBERRA (Reuters) - Australian police have dropped inquiries into a government lawmaker at the center of a prostitution scandal, easing the threat of a by-election that could bring down Prime Minister Julia Gillard's minority government.
Police said on Thursday there was no basis for a formal criminal investigation against the MP, Craig Thomson, over the use of his union-funded credit card to pay for prostitutes when he was a union official in 2005. Thomson denied any wrongdoing.
"There is no basis for a formal investigation into any offence under New South Wales law," the New South Wales state police said in a statement on Thursday.
It is not illegal in Australia to pay for prostitutes, but fraud police investigated whether he had misused his card.
The police decision is a major boost for Gillard, as any criminal charges against Thomson could have forced him out of parliament and forced a by-election, which could have led to Gillard losing her one-seat majority in parliament.
Deputy Prime Minister Wayne Swan said it was now time for opposition lawmakers to stop their campaign against Thomson and to accept the police decision.
"There is no evidence to warrant a formal investigation," Swan told Australian radio.
The scandal dominated politics in the final weeks of August after Thomson's former union, the Health Services union, referred his credit-card spending to police.
Fraud and cyber crime police examined Thomson's credit card bills and 120 pages of documents from the union.
Opinion polls on Tuesday found Gillard would be easily swept from office if an election were held now.
The next election is due in late 2013, but the government could fall if it loses one seat to a by-election, or if any of the independent and Green lawmakers who support it withdraw support and back the conservative opposition.
Despite her political problems, the independents and Greens continue to back the government.
(Reporting by James Grubel; Editing by Mark Bendeich)