The immediate future of New Zealand's most important trading and strategic partner this morning remains clouded by an election that seems likely to produce its first hung Parliament in 70 years.

While shifts late yesterday suggested the ruling Labor Administration might nudge ahead by one or two seats, the ultimate shape of the Government will be in the hands of three or four independents.

The decision they make will decide whether Julia Gillard becomes Australia's first elected female Prime Minister, or whether Opposition Leader Tony Abbott will challenge predecessor John Howard as the Liberals' greatest Lazarus.

Either way, the new Government will be constrained by the need to negotiate its legislation with independents and the Greens' first federal MP in the House of Representatives, and in a Senate where the Greens will hold the balance of power.

Officials have yet to count absentee, postal and other votes that could be crucial to the results in the few remaining seats in doubt, but it is certain that none will change the fundamental truth: neither party has won the trust of Australian voters. Although state parliaments have experienced minority governments and political marriages of convenience, a hung federal parliament is new to Australia.

Its only previous experience was a brief crisis in the heat of World War II.

The big certainty is that whatever the outcome, Abbott's prestige will be cemented by a turnaround that took the Coalition from the political wasteland to either Government or so close that his authority will be without challenge.

If computer predictions are correct and Gillard scrapes to a tiny lead over Abbott, and if the independents decide she is worthy of their support, she could become the first elected female prime minister.

A Coalition victory would almost inevitably trigger a Labor bloodbath.

For New Zealand, the most significant issue will be the economic competence of whichever party wins power. The principals and policies of the major parties, and the most important personalities on both sides, are well known in Wellington.

But once the turmoil recedes, it should be business as usual.


The leaking of support for Australia's Labor Party shows there is no room for complacency for any government, says New Zealand's Labour leader Phil Goff.

Labor and the conservative Liberal Party-led coalition each had 71 seats yesterday, but a 76-seat majority is needed to govern.

"A year ago it was almost a foregone conclusion that the incumbent government [Labor] would be re-elected and with a big majority," Mr Goff said.

Mr Goff said the New Zealand economy had not done as well as Australia's and the message from the election there was that "no government can be complacent".