Greens enjoy kingmaker role as Australia heads for hung parliament

Australia's climate change policy is resting on a knife edge after both leading parties failed to secure a working majority in Saturday's election, leaving the future make up of any government in the hands of a small band of Green and independent MPs.

With just a small number of seats yet to declare both the ruling Labor Party and the opposition Liberals are expected to fall short of the 76 seats they need to form a working majority – resulting in the first hung parliament in the country since 1940.

Prime Minister Julia Gillard and opposition leader Tony Abbott both flew to Canberra today to begin days, if not weeks, of negotiations as they attempt to stitch together a coalition government.

Gillard insisted Labor had the right to try and form a government first after securing the majority of the two-party-preferred votes under Australia's preferential voting system.

However, Abbott countered that a huge swing away from Labor meant it was " almost inconceivable that any Labor government emerging from this election could deliver competent and stable government".

Attention has now turned to a small handful of independent MPs – Bob Katter, Tony Windsor and Rob Oakeshott, who have formerly had ties to the Liberal Party – who have said they will stand "shoulder-to-shoulder" in talks with both main parties, and Greens MP Adam Bandt, who is expected to support Labor.

A fourth independent MP who was previously a member of the Greens, Andrew Wilkie, is expected to win the Tasmanian seat of Denison. It had been thought he could side with Labor, but in comments to news agency AAP he insisted he was no longer tied to the Greens and would make an independent decision on which party to work with.

"I am genuinely independent," he said. "I am going to put it to the Labor Party and the [Liberal-led] coalition to convince me that you can deliver stable government for three years, competent government for three years and ethical government for three years."

Depending on the final vote tally, Labor and the Liberals are expected to need the backing of between two and four independents to secure a majority.

Climate change policy is set to play a key role in the political horse-trading with the Greens likely to try and drive a hard bargain in return for their support.

The Greens have been emboldened after seeing its share of the vote hit record levels in what party leader, Bob Brown, described it as a "Greenslide". They are now expecting to have between eight and 10 seats across the two houses of parliament by the time all votes are counted.

The party refused to back the previous Labor government's controversial climate change bill on the grounds that it did not go far enough and it is now likely to demand a more ambitious set of proposals for curbing carbon emissions in return for its support.

However, at the same time the Liberal Party remains fiercely opposed to the previous government's proposals for a climate change bill that would put a price on carbon and, if Abbot secures the right to form the next government, Australia's climate change policy is likely to be put on ice for the next four years.