August 21, 2010 / 1:29 AM / 9 years ago

Australia faces a hung parliament

SYDNEY (Reuters) - Australia’s two major parties on Sunday start wooing independent lawmakers after an inconclusive election left the nation facing its first hung parliament since 1940, the worst-possible outcome for markets.

Australian Prime Minister Julia Gillard waves to supporters at the Labor Party election headquarters in Melbourne August 21, 2010. REUTERS/Mick Tsikas

Predictions based on nearly 80 percent of the votes counted show that both the ruling Labor Party and the opposition conservatives fell short of enough seats to form a government alone, forcing them to rely on four independents and a Green MP to take power in the lower house of parliament.

“Obviously this is too close to call. There are many seats where the results are undecided,” Prime Minister Julia Gillard told Labor party faithful gathered in Melbourne on Saturday.

Australia’s first woman prime minister said it could take a number of days for the final result, but she appeared already to be wooing independents who could decide the next leader.

Analysts projected around 70 seats for the two major parties, with four independents and one Green MP.

That would be six short of the number Gillard would need to keep control of the 150-seat lower house and mean a hung parliament for the first time since World War Two.

Opposition leader Tony Abbott also said he would in coming days talk to independent members of parliament on forming a minority government after Saturday’s inconclusive election.

“We do not have a clear result from tonight. What is clear from tonight, the Labor party has definitely lost its majority and that means the government has lost its legitimacy,” he told Liberal-National party faithful in Sydney.

“The uncertainty is going to be a real killer to the financial markets and it’s the Aussie dollar that’s going to react most strongly,” said Craig James, chief economist at Commsec.

“The currency could fall at least a cent or maybe even more as investors reduce their positions in the Australian economy,” added James.

Independent Tony Windsor said he would be “quite happy to talk to anybody” when the final results were in, local media reported.

“The most important issue here is stability of governance,” he was quoted as saying.

Some of the independents have protectionist views and are outspoken about Chinese investment in Australian resources.

At stake was not only the political future of Gillard and the opposition’s Abbott, both new and untested leaders, but also Labor’s plans for a 30 percent resource tax and a $38 billion broadband network.

Slideshow (6 Images)

Former barrister Adam Bandt, the Greens first lower house MP, said he would side with Labor if there was a hung parliament.

Professor Suri Ratnapala, a professor of law at the University of Queensland, said ruling Labor would be given a chance to form a government.

“If the leader of the party trying to form a government comes to an agreement with enough independent members to form a government, there would generally not be a need for a vote of confidence in government,” he said.

Additional reporting by Jamese Grubel, Michael Smith and Jim Thornill in Sydney, Chris McCall in Alice Springs and Fayen Wong in Perth; Writing by Ed Davies; Editing by Jonathan Thatcher

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