Australian opposition claims upper hand in government bid

SYDNEY (Reuters) - Australia's opposition claimed the upper hand on Tuesday in its bid to form a government, as counting from this month's inconclusive election gave it more votes and parliamentary seats than the ruling Labour party.

Neither the conservative opposition nor Prime Minister Julia Gillard's Labour Party won a clear majority at the August 21 election. Both are now locked in a race to secure enough support from independent MPs to form a minority government.

Financial markets hope that opposition leader Tony Abbott's conservative coalition prevails, given he has promised to scrap Gillard's proposed mining profits tax and carbon-trading plans, as well as a $38 billion fibre-optic broadband telecoms project.

Those hoped firmed on Tuesday, during the final stages of counting, when the conservatives eliminated Labor's lead in terms of overall votes -- an advantage Gillard had earlier promoted as a major reason why she was best placed to form a new government.

"It's basically consistent with what the market seems to have factored in: that Abbott will get up," said Shane Oliver, head of investment strategy at insurer and asset manager AMP, which manages $85 billion in Australia.

"At the moment the market is hanging on the belief that the coalition will probably get up, and that's helped mining stocks."

Australian shares fell on Tuesday, in tune with a sell-off on Wall Street, but mining stocks have fared better than other sectors of the local market since the election on hopes that Gillard would be ousted and the mining tax scrapped.

Miners that stand to benefit from the tax's demise include Rio Tinto, BHP Billiton, Xstrata and Fortescue Metals Group.

Political and constitutional experts have dismissed the market's reaction as wishful thinking, noting that more seats or votes could have no bearing on outcome. They also point out that most of the independents in the new parliament favour some Labour policies over the conservative's agenda.

Underlining the volatility in the wake of the election, a poll on Tuesday showed more than one in 10 people would have voted differently had they known the country was headed towards gridlock, pointing to a vastly different parliament next time around.

But the opposition sought to claim the moral high ground on Tuesday, as the official vote count showed the conservatives just ahead of Labour on the two-party vote: 50.01 percent versus 49.99 percent -- a difference of 1,700 votes -- with 85 percent of the vote counted.

In terms of seats, projections point to the conservatives ending up with 73 seats and Labour 72, with four independents and one Green MP. The Green lawmaker has already said he is likely to side with Labour, leaving the independents to decide who governs.

To govern, 76 seats are needed in the 150-seat lower house.

"We hold more seats in the House of Representatives, we hold more (upper house) Senate seats than Labour, so it's hard to see what moral authority or legitimacy Julia Gillard can now claim to try and seek to govern," deputy opposition leader Julie Bishop told ABC radio on Tuesday.

Later on Tuesday, Prime Minister Gillard is due to speak at the National Press Club in Canberra, in between intense negotiations with the independents in an effort to form government. At least one of the independents said he would decide this week which side to back.

That independent, Andrew Wilkie, has already asked both Gillard and Abbott to launch a crackdown on gambling, which would affect stocks like Tabcorp Holdings, Tatts, Crown and Aristocrat Leisure.

(Editing by Balazs Koranyi)