Bid to end Australian poll deadlock

The ruling centre-Left Labour Party lost votes to the environmentalist Greens party as the government was punished for shelving plans to charge major polluting industries for every ton of carbon gas they emit.

Prime Minister Julia Gillard, who remains caretaker leader, said it was clear no party had won a majority of parliamentary seats in Saturday's poll – the result of which may not be known for a week. Market analysts predicted the uncertainty would push the Australian dollar and stock market lower when trading resumed today.

With more than 78 per cent of the vote counted, the Australian Electoral Commission said Labour had won 70 seats and the opposition Liberal Party-led coalition 72. Most analysts agreed the coalition was likely to finish with 73, one seat ahead of Labour.

Ms Gillard and Liberal leader Tony Abbott said they initiated talks with three independents in the House of Representatives, as well as the Greens party in an attempt to secure votes in the House of Representatives. Neither revealed what they were prepared to offer in the confidential negotiations.

Both Labour and the Liberals conceded neither would achieve the 76 seats needed to form a government in the 150-seat lower chamber.

Ms Gillard said: "So the question before all of us is this: Which party is better able to form a stable and effective government in the national interest?"

Mr Abbott – who doubts the science behind climate change and rules out ever taxing polluters for their greenhouse gas emissions – said the Labour government had proved unstable after Ms Gillard ousted former Prime Minister Kevin Rudd in a surprise internal party coup two months ago.

"It's certain that any Labour government emerging from yesterday will be chronically divided and dysfunctional," Mr Abbott said.

Analyst Norman Abjorensen, an Australian National University political scientist, said the most likely outcome would be an unstable minority government led by Mr Abbott and supported by three independents.

Independent Tony Windsor said he planned to talk to fellow independents Bob Katter and Rob Oakeshott to decide whether to negotiate a power deal with the major parties as a group or individually.

The Greens' record support in the polls increased the party's Senate seats from five to nine, giving it the leverage to become kingmaker in deciding which major party controls the upper chamber.

Greens party leader Bob Brown said no agreement had been reached after a "cordial" conversation with Ms Gillard, who was seeking the support of newly- elected Greens candidate Adam Brandt, who previously stated his preference for a Labour government.

No Australian government has had to rely on the support of independent members to rule since 1943.

The election results were expected to be the closest since 1961, when a Liberal government retained power with a single seat.

The prospect of no party controlling Parliament added to concerns already shaking markets about the economy, said AMP Capital Investors chief economist Shane Oliver.

"Uncertainty over who will govern, fears of a possible drift toward less business-friendly policies reflecting the increased power of the Greens, worries about less decisive policy-making, and a likely absence of longer-term reforms under a minority government will all likely add to jitters in the Australian share market and in the Australian dollar," he said.