Australia facing hung parliament after knife-edge election

Australia faces the prospect of a hung parliament, the second in six years, after neither of the country’s major parties won enough seats to form a government in Saturday’s general election.

With 77% of the votes counted on Sunday morning, the ruling Conservative coalition led by Prime Minister Malcolm Turnbull was neck-and-neck with the centre-left Labour Party, led by opposition leader Bill Shorten.

The Conservative Party and the Labour Party have since began courting the five lower independents who will be kingmakers to break the anticipated parliamentary deadlock, although the prime minister insists he is “quietly confident” of a narrow majority after postal voters are counted.

Each was projected to had secured about 67 seats, nine short of the majority needed in the 150-seat lower house. Eleven seats were still too close to call. The Greens had won one, while four seats were taken by independent candidates.

The close vote leaves Prime Minister Malcolm Turnbull's centre-right Liberal Party-led government in a precarious position, potentially needing the support of independent and minor parties. After suffering an unexpected nationwide 3.4% swing and losing 11 seats to Labour, with at least six more in doubt, Turnbull has begun contingency planning for the minority government he has long argued would be chaotic and disastrous for the nation.

While he insisted he was “quietly confident” of a majority Coalition government, the prime minister – in a sharp contrast to his election campaign warnings about the dangers of a vote for minor parties – emerged on Sunday afternoon to promise to “work constructively” with the crossbench to deliver a stable government “without division or rancour”.

Shorten, who polled better than expected especially in “battler” seats with lower average wages and higher unemployment, said he was ready to work with “people of goodwill in the parliament” and had also begun talking to the crossbench.

The deadlock also opened the door to the possibility, albeit less likely, that the main opposition Labour Party could win enough backing from the smaller parties to form government itself

Meanwhile, police said they were considering whether to investigate thousands of text messages sent to voters on Saturday by the Labor Party purporting to be from the state healthcare service Medicare, warning the service would be privatized by a coalition government.

Labor leader Bill Shorten said Australians had rejected Turnbull's mandate for reform like cuts to healthcare and a A$50 billion ($37 billion) corporate tax break over 10 years.

"What I'm very sure of is that while we don't know who the winner was, there is clearly one loser: Malcolm Turnbull's agenda for Australia and his efforts to cut Medicare," Shorten told reporters in Melbourne.

The election was meant to end a period of political turmoil in which Australia which has had four prime ministers in three years. Instead it has left a power vacuum in Canberra and fuelled talk of a challenge to Turnbull's leadership of the Liberal Party, less than a year after he ousted then prime minister Tony Abbott in a party-room coup.

If the coalition fails to form a government, it would be the first time in 85 years an Australian ruling party has lost power after its first term in office.

The uncertainty is likely to spook markets when they reopen on Monday, with analysts warning Australia's triple A credit rating could be at risk and predicting a fall in the Australian dollar and the share market.

Vote counting could take a week or more, and the coalition will rule under caretaker provisions in the interim.

Official electoral data for the House of Representatives showed a 3.4% swing away from the government, with about two-thirds of votes counted.