Nearly a week on from the August 21 election, Australia is still no closer to forming a government, with neither of the major parties close to striking a deal with cross-bench MPs, raising speculation that another election might be in prospect.
Markets are hoping for conservative leader Tony Abbott to form a minority government so he could deliver on pledges to kill off the outgoing government's plans for a mining tax, a price on carbon emissions and a $38 billion (24.5 billion pounds) telecoms project.
But Abbott has been accused of treating the independent MPs coldly, raising talk that he would prefer another election to negotiating a minority government.
That theory was fantasy, said Abbott, who initially refused to cooperate with the independents and whose Liberal-National coalition has one more seat than Labor.
I think the public and Australia deserves an outcome from this election, Abbott told a news conference in Sydney.
Labor Prime Minister Julia Gillard and Abbott have both fallen short of the 76 seats need to command a majority in the 150-seat parliament.
The conservatives have provisionally won 73 seats, while ruling Labor secured 72. Five independent and Green MPs will now decide who forms a minority government.
But Abbott on Friday said only three sitting rural independents, all former National party members, held the key to the conservative's forming government.
I believe it's important that Australia should have a competent and stable government emerge from this election. Given the position of the three (rural) independent members...I think negotiations with them are the key, Abbott said when asked about whether he could form an alliance with the Greens.
Abbott ruled out doing a deal with the sole Green MP due to his demand for a carbon price, and did not mention a fourth city independent who was critical of a former conservative government's support for the war in Iraq.
Labor probably needs the support of two of the three rural independents, along with the Green MP and independent from the city of Hobart on the island state Tasmania.
Gillard said she held productive talks on Friday with the Greens. Gillard supports a market-based carbon price to combat climate change and a worry for Abbott is that two of the rural independents also support a carbon price.
GREENS SEEK LABOR MINORITY GOVT
Greens leader Senator Bob Brown said the talks with Gillard were very constructive. We are working to see if a Labor government can be formulated, Brown told reporters after the meeting, adding Abbott had not yet organised a meeting.
Asked how long Australia should wait for a new government to be formed, Abbott declined to set a deadline.
I understand it is going to be difficult for them to make a choice. I am not trying to pressure them into any kind of timetable, he said.
I just make this point, it is a national government...and it is important that the decision is not unduly delayed.
Australians are betting that any minority government formed in the next few weeks will not last a full term and fresh elections will be called in 2011, said an online bookmaker.
Online bookmakers Sportingbet said the odds were shortening for an early election, possibly in 2011, to sort out the impasse.
Punters know that any minority government would face plenty of problems and the new prime minister, whoever that may be, could be forced to call an early election, Sportingbet Australia chief Michael Sullivan said.
And at least one analyst said a new poll could be seen as a positive development and preferable to an unstable government.
If the alternative was an election or an unstable government where there was no major policy decisions being made, then I think an election would be preferable, Macquarie Bank senior economist Brian Redican said.
(Additional reporting by James Grubel in CANBERRA; Editing by Alex Richardson)