Australia election: Talks start after hung vote

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Three independent MPs who may hold the balance of power following Saturday's inconclusive election in Australia say they will negotiate as a bloc.

With some votes still to be counted, both the ruling Labor party and the opposition conservative coalition appear to have fallen short of the 76 seats needed for a majority.

Both are now lobbying for support from the independents.

Trading was down as financial markets opened, amid the political limbo.

The Australian dollar and government bonds both fell in value. The Australian dollar lost almost 1% against the US dollar in early trading, before recovering somewhat.

Australia has not elected a hung parliament since 1940.

But the latest figures from Australian public broadcaster ABC give Labor 72 seats and the coalition 69 seats. The Greens secured one seat and independents won three. Five seats have not yet been called.

'Shoulder to shoulder'

On Monday, both Prime Minister Julia Gillard and opposition leader Tony Abbott flew into Canberra to start working to try to secure a majority. Both have opened talks with the independents.

"It's my intention to negotiate in good faith an effective agreement to form government," Ms Gillard told journalists on Sunday.

Attention is focusing on three independent MPs - Bob Katter, Tony Windsor and Rob Oakeshott - who represent rural and regional constituencies.

Mr Oakeshott said the trio would stand "shoulder to shoulder" during the negotiating process, so they did not "get picked off by political interests and vested interests".

Another independent, Andrew Wilkie, looks on course to win the Tasmanian seat of Denison, while Adam Bandt secured one seat for the Greens.

Mr Abbott claimed the current government had lost its legitimacy.

"It's almost inconceivable that any Labor government emerging from this election could deliver competent and stable government," he said.

The election came two months after Ms Gillard ousted Kevin Rudd in a controversial leadership challenge.

Correspondents say Mr Abbott has tried to exploit the Labor party's divisions after the departure of Mr Rudd, trying to portray the opposition coalition as a stable answer to a government beset by in-fighting.

In his campaign he has pledged to tighten immigration and has hit out at government spending. He has also toned down his well-known climate change scepticism.

Ms Gillard, a former lawyer who called a snap election shortly after coming to office, was hoping to be rewarded for the government's handling of the economy, which weathered the global recession remarkably well.

But support for Australia's first female prime minister has fallen in the two months she has been in office.

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