Australians went to bed last night with the nation in political limbo, facing its first hung parliament since World War II.
As counting continued into the wee hours of Sunday morning, it was looking increasingly likely that Australians had denied both Labor and the coalition the right to govern in their own right.
Up to four independents and the Australian Greens' Adam Bandt look likely to hold the balance of power in the House of Representatives.
The scenario was not entirely unexpected - the nation went to the polls yesterday to vote in the tightest election contest in living memory.
Labor faced a major backlash in Queensland, where a number of Liberals ousted in 2007 were returned to parliament.
Another darling of 2007, Maxine McKew, lost the seat of Bennelong to former tennis champion John Alexander.
But the Liberals didn't have it all their own way, losing the Victorian seat of McEwen to Labor and facing a white knuckle ride in La Trobe and Boothby.
Just after 11pm (AEST), Prime Minister Julia Gillard faced the Labor faithful in Melbourne, confirming the count was too close to call.
"There are many seats where the result is undecided and it will take a number of days to determine a result," she said.
She assured supporters the fight was not yet over but acknowledged there would be "anxious days ahead".
"The fight for that plan is not over yet, we will continue to fight for it in the days to come, we will continue to fight to form government in this country," she said.
Just before midnight, flanked by his wife Margie and three daughters, Opposition Leader Tony Abbott faced excited supporters who filled the Four Seasons Hotel ig "Tony, Tony, Tony".
"We do not have a clear result from tonight," he said.
But he vowed: "We stand ready to govern".
He claimed Labor had lost its mandate.
"The Labor Party has definitely lost its majority," he said.
"What that means is that the government has lost its legitimacy."
Nonetheless, he urged against "premature triumphalism tonight".
The result - or lack thereof - is a kick in the pants to both Labor and the coalition.
After its stunning victory in 2007, Labor dumped prime minister Kevin Rudd in June and went to the polls with a small target strategy, attempting to appease swinging voters on issues like border protection and climate change.
Despite changes to its mining tax, Labor took a hammering in resource-rich Western Australia, where it is tipped to lose a Senate seat.
But the public rebuff of Labor was not necessarily an endorsement of the coalition, which ran a relentlessly negative campaign, targeted at Labor's faults rather than its own vision for Australia.
Ms Gillard extended an olive branch to the independents and Mr Bandt, who will most likely decide whether Labor or the coalition form a minority government.
Independents Rob Oakeshott, Tony Windsor and Bob Katter all retained their seats, and former spy Andrew Wilkie was looking a good chance at snatching the Tasmanian seat of Denison from Labor.
"I acknowledge the election of these independents and a member of the Greens to the House of Representatives," Ms Gillard said.
"I have had a good track record in the federal parliament working positively and productively with the independents in the House of Representatives and working with the Greens in the Senate."
Mr Abbott indicated he planned to talk to the independents in coming days.
Mr Oakeshott told AAP his priority would be to help deliver stable government.
The three independents won't necessarily side with the party that has the most seats or votes in the lower house.
Rather, they'll look at who could best deliver stable government "taking into consideration the make-up of the Senate", Mr Oakeshott said.
"I think that is going to be critically important in how we work through the question of what is the design of the next executive to best deliver outcomes for this country for the next three years."
The Greens are tipped to hold the balance of power in the Senate, and would be expected to work more easily with Labor.
With 75 per cent of the vote counted at 12.01am (AEST) on Sunday, Labor was slightly ahead on the national count with 50.52 per cent of the vote after suffering a 2.62 per cent swing against it.
The Australian Electoral Commission was giving 60 seats to Labor, 59 to the coalition, three to the independents and one to the Australian Greens.
It had 27 still undecided.
Foreign Minister Stephen Smith signalled the count would be very changeable in coming days.
"This is going to bounce around," he told ABC TV.
The coalition needs 17 Labor seats to win the election by garnering a uniform swing of 2.3 per cent across the country. But the government can lose its absolute majority if it loses 13 seats.
If Labor fails to create a workable majority, it will be the first first-term government to lose after one term since the Fisher government.
A hung parliament would add to the unprecedented political gyrations of the past few months after the bloody ousting of Mr Rudd by factional warriors.
But senior NSW powerbroker Mark Arbib stood by the decision to replace Mr Rudd as leader.
"We made 100 per cent the right decision," he told AAP.
The Australian Greens were the only party celebrating, with the party claiming its first seat in the House of Representatives at a general election.
Mr Bandt has snatched the seat of Melbourne from Labor. The seat was formerly held by Finance Minister Lindsay Tanner, who is retiring.
