CANBERRA (Reuters) - Australian Prime Minister Julia Gillard won backing from the influential Greens party on Wednesday, lifting her lawmaker tally by one as she tries to form a minority Labour government after inconclusive elections.
The deal gives Gillard 73 seats in the 150-seat lower house and brings her level with rival conservatives, but could unsettle markets wary of a stronger Greens influence over contentious Labour mining tax and carbon trading policies.
"It does lead to some nervousness. With Greens' control of the Senate it sets in motion less friendly business policies starting from mining tax to climate change," said Shane Oliver, Head of Investment Strategy at AMP Capital.
The conservative opposition, which campaigned heavily on the threat of a Labour-Greens tie-up, will likely use the deal to attack Gillard's policies and woo four "kingmaker" independent lawmakers trying to decide who to back into power.
If Labour wins the 76 seats in needs to govern, the Greens deal would commit it to tackling climate change, holding a parliamentary debate on the war in Afghanistan and consulting the Greens on economic and budget issues as the economy powers ahead.
Data released on Wednesday showed that Australia's gross domestic product (GDP) rose by 3.3 percent in the second quarter from the same period in 2009, well above the 2.9 percent forecast in a Reuters poll.
As part of their agreement with Labour, which includes a future referendum on constitutional recognition of indigenous people, the Greens promised to ensure budget supply bills and back Labour in any no-confidence motions.
In return, the government agreed to a new climate change committee of politicians and experts to work out the best way forward for climate policy, with a view to putting a price on carbon emissions.
But more contentious issues, including the controversial mining tax, a price on carbon and gay marriage, were left out of the pact to avoid driving off more support for Labour from rural-based independents with conservative leanings.
"We favour Julia Gillard leading the next government of Australia and we are working to that end quite clearly. We have made a decision here. We think that will help lead others to making a decision," Greens leader Bob Brown told reporters at parliament, flanked by sole lower house Green Adam Bandt.
The independent lawmakers now hold the key to power, but may take another few days or so to decide whether to support Labour or the conservative opposition coalition led by Tony Abbott.
"I think it might be a bit optimistic to say this week, but I would be very surprised if it went beyond Monday or Tuesday," rural-based independent Bob Katter told Australian television.
Another independent, Andrew Wilkie, said he was undecided on who to back after earlier giving himself a Wednesday deadline for making his mind up on who would meet a long list of demands.
"The reality is that it is going more slowly than I had hoped," Wilkie said.
Bookmakers are tipping a win for the conservative coalition, which has promised to scrap the mining profits tax and carbon-trading plans, and a $38 billion broadband project that could hurt dominant telecoms provider Telstra.
Australia's struggle to forge a government has failed to unsettle financial markets: the Australian dollar is almost unchanged from its pre-election level and stocks have lost only about 0.5 percent since the vote.
Investors are mostly worried that an economic slowdown in the United States and Japan could spill over into Australia.
(Reporting by Rob Taylor; Editing by John Chalmers)
