Nation wakes to the prospect of a hung parliament after deadheat election

THE 'dead-heat' election means Australia now faces a period of instability and potentially weak government unprecedented since World War Two.

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THE 'dead-heat' election means Australia now faces a period of political instability and potentially weak government unprecedented since World War Two.

Both Julia Gillard and Tony Abbott made clear in their speeches late last night they will try to form a minority government with support from independents. Neither leader has surrendered power. Both seek to become Prime Minister from this contest.

This means the election is not over. There is still no winner. The battleground has shifted towards the emerging new parliament. It is about cutting the best deal with the highest number of independents who are sure to be divided among themselves.

The potential traps in this situation for Gillard, Abbott and the independents are immense.

Critical to the result will be which party finishes with the most seats, and this remains uncertain. The best assessment is Coalition on 73 seats and Labor on 72 seats.

A 76 seat majority is needed to form a government and that is most likely to be constructed by a negotiated arrangement.

In this unresolved situation a few firm judgements can be made.

First, this election is a huge repudiation for the first-term Labor Government and the worst set back for such a government since the one-term Scullin Government in the Great Depression. Second, Tony Abbott's political recovery since winning the leadership from Malcolm Turnbull late last year has almost no parallel in our history.

Third, the Greens continue to improve their position holding the Senate balance of power and winning their first House seat at a general election. Fourth, the Labor brand is contaminated in Queensland and NSW where the damage was done. This is where the 2007 Rudd surge was repudiated and reversed.

The message from all sides is that Australia can emerge from this hung parliament with a stable government. Frankly, that is a heroic call.

There are four certain independents or minor party members. Three are the re-elected Bob Katter, Rob Oakeshott and Tony Windsor who represent conservative electorates. Their message is that they will consult and seek a stable outcome.

The newly elected Green, Adam Bandt, in the seat of Melbourne, will back Labor. The likely fifth member is Andrew Wilkie in Tasmania, who previously ran as a Green and is more likely to support Labor.

Gillard and Abbott will now enter a consultation process with the independents. But progress must wait upon the final determination of the seats. The independents will want to ensure that the decisions they make are acceptable to their electorates.

Abbott stressed last night that Labor had lost its legitimacy as a government. It is a proposition that Labor rejects. The risk is that whoever forms government will have only a limited ability to implement their program. Yet there is no substitute for the advantage of incumbency.

A new battle has begun - it is over the undecided seats, political legitimacy, the judgement of the independents and the conventions that surround this situation.