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Australia's "kingmakers" meet to discuss next govt

CANBERRA (Reuters) - Three independent MPs who will decide the shape of Australia’s minority government met on Tuesday to forge a united front, but ruled out any quick fix to a political impasse that has unsettled financial markets.

The trio said they could hold meetings with Labor Prime Minister Julia Gillard and conservative rival Tony Abbott on Wednesday, but would not leap to any decisions.

“We don’t want to rush this process. We’ll try to get some sleep tonight. We are all reasonably weary,” Tony Windsor, one of the three rural-based lawmakers holding the key to power, told reporters at Parliament House in Canberra.

A weekend election left Australia with its first hung parliament since World War Two.

Another of the independents, maverick outback MP Bob Katter, played down any early breakthrough in preliminary talks with the major party leaders, warning they would be opening discussions.

“We’ll be back for a full week next week,” said Katter, adding it would be premature to reach a deal before election officials finalized the count in close seats late next week.

At stake in the election is the fate of Labor’s planned 30 percent mining profits tax, a $38 billion fiber-optic broadband network and a future carbon price which the power sector says is needed to ensure continued investment.

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Latest counting gives Labor and the opposition conservatives 71 seats each -- with 76 seats needed to command a majority -- but poll experts predict both will end up with 73, leaving three independents and a Green MP holding the balance of power.

Bookmakers say Labor is favorite. But markets are hoping for a conservative government to counter Greens, who want higher taxes, more generous welfare and a price on carbon pollution by business, wielding the balance of power in the upper house Senate.

Standard and Chartered Bank’s regional economist Simon Wong predicted the controversial mining tax was now dead, whichever of the two major parties ended up in power.

“The debate over this issue in the run-up to the election proved to be a key factor that eroded Labor’s initial lead, and is likely to be too heavy a political burden for the incoming administration to bear,” he said.

Abbott said he could run a stable government, in contrast to tensions in the Labor Party, and said he would offer “serious roles” to the independents. He declined to say if he would change any policies, and noted the result could still take some time.

“No-one should expect that this will be a speedy process,” Abbott told reporters.

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The last of the independents, Rob Oakeshott, called for parliamentary reform and a unity cabinet in which senior lawmakers put aside rivalries.

But news cartoons mocked his idea, showing Abbott and Gillard standing arm in arm, surrounded by flying pigs and fairies, and with an Irish leprechaun standing beside Greens lawmakers at the end of a rainbow with a pot of gold.

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Financial markets have rowed back on early expectations of a minority conservative government and now seem comfortable that both sides are fiscally prudent, despite concern about a Green-backed government.

Both Labor and the Liberal-National coalition have pledged to return the budget to surplus by 2012-13.

“There would be concerns about what sort of deals are done with the Greens to be able to guarantee that support,” said Craig James, chief economist at CommSec equities securities.

There was also concern over how a minority government may deal with foreign investment in Australia.

China is the third-largest foreign investor in Australia and its biggest trading partner, but increasing investment in the resource sector by state-owned Chinese firms has led to concerns among many voters and lawmakers, including Katter.

Labor and the opposition have said they will review foreign investment on a cases-by-case basis, but analysts raised the possibility of protectionist pressure from the independents.

“Given the extraordinary circumstances of a hung parliament, and the as yet unknown requirements of the independents who may hold the key to governing, it cannot be discounted that changes to the foreign investment regime may be bargained for support,” said Malcolm Brennan, special counsel at Mallesons Stephen Jaques.

Additional reporting by Michael Perry in Sydney; Editing by Ed Davies and Alex Richardson