With counting still going on yesterday, Australia’s Welsh-born Prime Minister Julia Gillard had begun talks with a handful of independents who held the balance of power.

Pollsters predict the sitting Labour government has won 72 seats and the Liberal coalition 70 – both short of the 76 needed to control the 150-seat House of Representatives.

There were fears that the inconclusive poll could spark a run on the Australian dollar today. But Miss Gillard vowed she would provide “stable” government.

She said: “It is my intention to negotiate in good faith an effective agreement to form a government.”

The former lawyer had a majority of 83 seats when she called a snap election just two months after ousting former leader Kevin Rudd.

Liberal leader Tony Abbott said the results showed Labour had lost its legitimacy. “There was a savage swing against this government,” he said. “It’s almost inconceivable that any Labour government emerging from this election could deliver competent and stable government.”