Australia’s financial market shaky after inconclusive election

Trading is down as financial markets open in Australia, following this weekend’s inconclusive election.

The Australian dollar and government bonds both fell in value.

Prime Minister Julia Gillard has held initial talks with independent candidates to try to form a government after her Labor party lost its majority.

Ms Gillard said she would continue to provide “stable” government as final votes are counted.

The Australian dollar lost almost 1% against the US dollar in early trading, before recovering somewhat.

Ms Gillard has acknowledged that neither her Labor Party nor the opposition conservative coalition was likely to win the 76 seats needed for an outright majority.

Australia’s ABC is forecasting 72 seats for Labor and 73 for the conservatives.

“It is clear that neither party has earned the right to government in its own right,” Ms Gillard said. She added that Labor had won the most votes overall nationally, if minor parties are discounted.

But opposition leader Tony Abbott said it was clear Labor had lost its parliamentary majority and its legitimacy.

“There was a savage swing against this government,” he said. Mr Abbott said he had also made contact with the independents candidates.

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

‘Good faith’

Australia has not elected a hung parliament since 1940.

A handful of members of parliament now appear to hold the balance of power. They include three independents, a Green Party candidate, and an independent whose seat is not yet confirmed.

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

She added that she would “continue to provide stable and effective government in accordance with our democratic process while the final votes are counted in this election”.

‘Night of pride’

Tony Windsor. one of the independents, said he had received two “very kind phone calls” from Ms Gillard and then Mr Abbott.

“Obviously we did mention if there was a hung parliament that there may have to be some discussion,” he added.

Mr Abbott said the government had “lost its legitimacy.

“It’s almost inconceivable that any Labour government emerging from this election could deliver competent and stable government. ”

Correspondents say Mr Abbott has tried to exploit the Labor party’s divisions after the departure of Mr Rudd, trying to portray his 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, is hoping to be rewarded for the government’s handling of the economy, which weathered the global recession remarkably well.

Ms Gillard won a leadership race in June but, despite her success, her support has fallen in the two months she has been in office.
Source: BBC