Australian leaders haggle to form government

The 3 kingmakers vow to stand shoulder-to-shoulder to produce a stable govt.

Updated: Aug 23, 2010, 10:00 AM IST

Sydney: Australia`s political leaders were on Monday set to begin horse-trading with a tiny number of independent MPs after a cliffhanger election poised to deliver the first hung Parliament in 70 years.

Prime Minister Julia Gillard, who suffered a fierce voter backlash, and opposition leader Tony Abbott both headed to Canberra along with the three independents who are likely to decide which major party will rule.

The three "kingmakers" -- Bob Katter, Tony Windsor and Rob Oakeshott, who all have past ties with Australia`s conservatives -- were due to hold talks, after vowing to stand "shoulder-to-shoulder" to produce a stable government.

"The three of us... we can make this work," Windsor told public broadcaster ABC.

"If the major parties actually move away from this dog-against-dog attitude that they`ve had through the election campaign and look to the national interest on this... we can come up with something that`s quite successful."

Saturday`s extraordinary election has triggered unusual political turmoil in Australia, which is known for its stability and has not had a hung Parliament since 1940.

The vote heightens the surreal nature of recent developments after Gillard`s Labor dumped elected prime minister Kevin Rudd in June, shocking Australia`s 14 million electors and prompting reprisals at the ballot box.

The latest ABC tally gave Gillard`s Labor Party 73 seats against 70 for Abbott`s conservative Liberal/National coalition, with both short of the 76 needed for an outright majority in the 150-member lower house.

The Australian Electoral Commission (AEC), whose official count lags behind the state broadcaster, producing some volatility in the media tallies, said Labor and Abbott`s coalition both had 71 seats.

The environment-focused Greens party has one seat and the AEC listed four seats as "doubtful". Officials are counting two million postal and absentee votes, which could take more than a week.

Labor suffered a negative swing of about 5.4 percent, according to the ABC, while the Greens enjoyed their best ever result, after both major parties vacillated on climate change.

An expected fall in share prices failed to materialise as dealers hoped Abbott would form a government, which would spell doom for a new tax on the all-important mining industry. The S&P/ASX 200 was flat at 12:30 pm (0230 GMT).

But the Australian dollar dropped 0.44 percent in early trade to 88.63/66 US cents. Bank of New Zealand currency strategist Mike Jones said the political situation had dealt the currency a "heavy blow".

Analysts fear a weak coalition government with a small majority could unravel within months or even weeks, forcing Australians back to the polls and roiling financial markets.

"The message from all sides is that Australia can emerge from this hung Parliament with a stable government," wrote Paul Kelly, editor-at-large for The Australian newspaper. "Frankly, that is a heroic call."

Bureau Report