Hung parliament looking likely

Prime Minister Julia Gillard and Opposition Leader Tony Abbott have begun to woo independent MPs after an inconclusive election result.

Labor currently holds 69 seats in the House of Representatives and the Coalition holds 71 seats.

In a speech to party faithful at the Melbourne Convention Centre late last night, the prime minister congratulated a number of independents including NSW independent Rob Oakeshott and Melbourne Greens candidate Adam Bandt.

"What we know from tonight's result is there will be a number of independents in the House of Representatives playing a role as the next government of Australia is formed," Ms Gillard said.

She described Opposition Leader Tony Abbott as a "formidable advocate" and "made of stern stuff".

Minutes later, in a speech to Liberal supporters, Mr Abbott was defiant.

"The Coalition is back in business," he said. "We stand ready to govern.

"What is clear from tonight is that the Labor Party has definitely lost its majority," Mr Abbott said in his speech at Sydney's Four Seasons Hotel.

"What that means is that this government has lost its legitimacy."

But he praised Ms Gillard for "working extremely hard for her cause under difficult circumstances".

PHOTOS: Election day drama

Australia faces its first hung parliament since 1940.

A hung parliament would add to the political gyrations of the past few months after the bloody ousting of former prime minister Kevin Rudd, who led Labor to victory in 2007.

VIDEO: Animation parodies Gillard

A hung parliament is when no party has a clear majority of seats.

It's a situation that can lead to a coalition government or a minority government. Or, at the Governor-General's behest, parliament can be dissolved and a fresh election called.

Labor recorded its biggest losses in Queensland, with a statewide swing of 9.5 percent against the ALP.

The fresh-faced, 20-year-old Liberal candidate Wyatt Roy is on track to win the his seat of Longman, north of Brisbane.

Mr Rudd retained his Brisbane seat of Griffith, however.

The Australian Greens are also celebrating after claiming their first seat in the House of Representatives at a general election. (Watch more here)

In NSW, Maxine McKew, the woman who won the seat of Bennelong from former prime minister John Howard at the 2007 election, lost her seat to former tennis champion John Alexander.

All eyes are now on Western Australia