Businessman and political aspirant Clive Palmer has demanded a new election in the federal seat of Fairfax on Queensland's Sunshine Coast.

His lead over the LNP's Ted O'Brien in Fairfax has narrowed to only 209 votes, with about 88 per cent of ballot papers counted.

Mr Palmer, who founded the Palmer United Party (PUP), says the election is rigged and the Australian Electoral Commission (AEC) is a national disgrace.

He says 768 pre-poll votes from one booth went missing from the voting centre at Coolum Beach, and later turned up at Buderim.

AEC confidence in process

On Monday afternoon, the AEC released a statement saying the sorting error makes no difference to the count overall, and it remains confident in the integrity of its processes.

However, the Federal Court says the AEC’s media release on Monday suggested there was a reserved judgment.

The court says today Justice Dowsett indicated he would reserve the question of costs in respect of Monday’s hearing, but otherwise Mr Palmer’s application was denied.

The AEC says there is a proper, transparent and evidence-based process for dealing with allegations of illegal behaviour via the Court of Disputed Returns.

Mr Palmer has told the ABC's PM program he has other concerns about the electoral process, particularly about ex-military officers involved in the process of counting votes.

"You've seen what's happened in Egypt with a coup over," he said.

"In a free democracy we don't want military personnel in control of our election process.

"We are civilians and it should be a civilian election.

"It's just too much of a coincidence you've got so many ex-military people acting as divisional directors in House of Representative seats."

Scope for vote tampering

Mr Palmer says the court injunction is not just about whether he wins in Fairfax.

"I'm still leading the election, but whether I win or lose is not material," he said.

"We've got to have integrity in our voting system."

He is also unhappy with the way Australians cast their ballots, saying there is clearly scope for tampering once the polling booths have closed.

"You don't show any identification when you go into vote," he said.

"And then you're given a ballot paper which you fill in with a pencil.

"Why do you fill it in with a pencil and not ink - so it can be rubbed out later? That's ridiculous."

PUP Queensland Senate candidate Glen Lazarus is on track to claim a seat in the upper house.

But the party has fallen behind in the Tasmanian Senate race.