Gillard warns of political gridlock if no consensus

CANBERRA (Reuters) - Australian Prime Minister Julia Gillard on Tuesday claimed her Labour party was best placed to run a stable minority government after the election dead heat, warning of political gridlock if a consensus cannot be found.

Gillard also said she was not in favour of calling a fresh election to resolve the impasse thrown up after neither of the country's main parties won a majority at the August 21 polls.

Labour and the conservative opposition are now in a race to win the support of four independent lawmakers to cobble together the parliamentary numbers needed to form a government.

In a speech to Canberra's National Press Club, Gillard said the next government needed to find ways of building consensus and support in parliament, and she was best placed to deliver.

"If the new government doesn't find new ways to establish consensus and parliamentary support, then we will have gridlock, and we will quickly look more like Washington than Westminster," she said.

"What is needed more than anything now is continuity -- continuity, certainty and delivery. I believe I can provide that stability, certainty and continuity."

Conservative opposition leader Tony Abbott earlier claimed the upperhand as counting from the election briefly gave his party more votes and parliamentary seats than Labour -- but that situation soon turned around, cheering Gillard's supporters.

Election projections point to the conservatives ending up with 73 seats and Labour 72, with the four independents and one Green MP who has already said he favours Labour in the race to gather the 76 seats needed to govern the 150-seat lower house.

One independent, Andrew Wilkie, has said he will decide this week which side to back. He has already asked both leaders to launch a crackdown on gambling, which would affect stocks like Tabcorp Holdings, Tatts, Crown and Aristocrat Leisure.

Financial markets hope Abbott's coalition prevails, given his promises to scrap Gillard's proposed mining profits tax and carbon-trading plans, and a $38 billion broadband project that could hurt dominant telecoms provider Telstra.

"At the moment the market is hanging on the belief that the coalition will probably get up, and that's helped mining stocks," said Shane Oliver, head of investment strategy at insurer and asset manager AMP, which manages $85 billion in Australia.

KINGMAKERS WANT STABILITY

Australian shares fell on Tuesday, in tune with a sell-off on Wall Street, but local mining stocks have fared better than other sectors 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.

Scrapping the broadband network is also seen as benefiting shareholders in Telstra, as it would kill a $10 billion deal by the company to provide its infrastructure to the scheme.

Political experts have dismissed the market's reaction as wishful thinking and point out that most of the independents favour some Labour policies over the conservative agenda.

Tony Windsor, one of the four independents holding the key to power, said he would back the candidate he felt would maintain a stable government, and not necessarily the one with most votes.

The four "kingmaker" MPs have threatened to force fresh elections should they lose faith in both sides' ability to deliver parliamentary reform and stability.

Underlining the post-election volatility, a poll on Tuesday showed 13 percent of voters would have decided differently had they known the country was headed towards gridlock, possibly pointing to a vastly different parliament next time around.

The nationwide Ogilvy Illumination poll in the Sydney Morning Herald newspaper showed voters aged between 18 and 24, and strongly supportive of Greens lawmakers backing carbon trading and broadband, were most inclined to change their vote.

Moody's Investors Service said it expected the stable trend in Australian corporate ratings to continue as the new financial year progressed, though conditions were likely to remain choppy as the effects of the sharpest slowdown in decades continued.

(Additional reporting by Mark Bendeich in Sydney and Rob Taylor in Canberra; Editing by John Chalmers)

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