Gillard promises stable but minority rule in Australia

The Australia prime minister Julia Gillard has vowed to keep the country stable after a voter backlash produced a rare hung parliament, raising fears of political paralysis and economic pain. Ms Gillard, whose Labor Party slumped in elections just two months after she deposed an elected leader, said she planned to form a minority government to resolve what analysts called Australia's biggest political crisis in decades. "We have robust democratic institutions and processes, and as prime minister I will continue to provide stable and effective government... while the final votes are counted in this election," she said.

The Welsh-born Gillard, Australia's first woman prime minister, was savaged in Saturday's polls which looked certain to bring the first hung parliament in 70 years as vote-counting went down to the wire for some marginal seats. Her campaign was overshadowed by voter anger over Labor's June mutiny against Kevin Rudd, who won 2007 elections by a landslide and enjoyed enduring support until his approval ratings finally dropped this year.

Labor and the opposition Liberal / National alliance were set for a dead heat of 73 seats each, falling short of the 76 needed for a majority, according to the public broadcaster ABC. Neither side conceded defeat, with Ms Gillard announcing her intention to form a government as she began talks with a handful of newly influential minority members of parliament. The independent MPs and one Greens lawmaker who now hold the balance of power were coy about their intentions, and one of them said the horse-trading could take days or weeks to play out.

Three of the would-be kingmakers were scheduled to discuss their plans during phone calls late Sunday as they weighed up whether to meet tomorrow in Canberra. "We've got to let the dust settle, see where the numbers fall and then the independents and others on the crossbench will come to some arrangement as to who governs," independent Tony Windsor told Australian television's Seven Network. "Someone will end up with 76 - I've got no doubt about that," he said.

Conservative opposition leader Tony Abbott, a staunch Catholic who questions man's role in climate change, said the outcome showed Australians wanted new leadership. "There was a savage swing against this government. It is historically unprecedented for a first-term government to receive the kind of rebuff that the Rudd-Gillard government received yesterday," Abbott said. "I think the public expects a change of government as a result."

Economists warned the extraordinary outcome would hit financial markets with both the Australian dollar and share prices expected to slide, threatening a mining-powered economy that has become the envy of the developed world. "Coming at a time of renewed concerns regarding the global economic outlook, the Australian election outcome will likely add to local investor nervousness in the short term," said AMP Capital Investors chief economist Shane Oliver.

University of Western Sydney analyst David Burchell said a hung parliament was the "nightmare scenario we all feared" and was unlikely to last longer than 18 months before deadlock brought it to collapse. "Neither will be able to pass, I would have thought, a significant body of legislation other than budget bills," said Mr Burchell. The election campaign had promised a fascinating clash between Ms Gillard, a feisty, unwed atheist, and Mr Abbott, a married father-of-three who once trained as a priest and is nicknamed the "Mad Monk" for his colourful demeanour.

The vote delivered the country its first Aboriginal and Muslim politicians in the lower house, and its youngest, with university student Wyatt Roy, 20, elected just hours after voting for the first time. But voters were largely uninspired by a lacklustre campaign of small-scale promises, and responded by filing more than 600,000 spoiled ballots in a country where voting is mandatory. Ms Gillard was hamstrung by the extraordinary dumping of Rudd and a series of damaging, cabinet-level leaks, which added further chaos to a stumbling election campaign.

Mr Abbott meanwhile remained tightly on-message, repeatedly promising to stop asylum-seeker boats, end government waste and cut taxes, while hammering Labor's lack of unity. The heavy swing of around 5.0 percent against Labor comes despite its successful stewardship of the Australian economy, which was dubbed the "wonder from Down Under" for escaping the global financial crisis without a recession. Analysts say it could take up to two weeks for the final results in some close constituency battles to be known as postal votes are counted.

* AFP