MALCOLM Turnbull was holding on in a cliffhanger contest last night, which could see him form government with a fragile majority.
The Prime Minister was clawing his way back to government with a reduced majority that raised the stunning prospect of a hung parliament.
But Liberals were hopeful he could secure 77 or 78 seats in the 150-seat Parliament. He needs 76 seats to govern. 
The failure of the Labor Party to secure seats in Victoria, despite swings across Australia, was one of the small silver linings in a nail-biting night for the Prime Minister.
ALP officials feared the party was set to go backwards and lose the Labor-held seat of Chisholm, which was a hotspot for anger over the Andrews State Government's war with CFA volunteer firefighters.
Last night the Liberal-held seat of La Trobe and the ALP seats of Chisholm and Batman were still in play.
As Labor leader Bill Shorten declared he was "ready to serve" after blitzing polling booths, gains in Western Sydney and Tasmania was keeping the ALP's hopes alive.
"We always knew this election was going to be very tight," Treasurer Scott Morrison said last night.
The Prime Minister remained holed up in his Point Piper mansion at 9pm as the -results came in.
The nail-biting result came as former prime minister Tony Abbott appeared to take a veiled swipe at Mr Turnbull during an interview with broadcaster Alan Jones.
Asked what it felt like to be an "anonymous figure", Mr Abbott said: "It's not about me.
"Egomaniacs normally get found out very quickly in this business and that's as it should be." A big scare campaign on Medicare was driving the ALP's political comeback. The rise and rise of Nick Xenophon was the big story in South Australia as his candidate Rebekha Sharkie captured the former Liberal stronghold of   Mayo from Jamie Briggs.
The NXT also was in the race for the previously safe Liberal seats of Barker and Grey. Mr Turnbull's double-dissolution trigger may still face a difficult passage through the Senate, with the Coalition unlikely to reach a majority in the Upper House.
The Government was still guardedly confident it would win enough seats in the Lower House to claim victory, but some are worried the Coalition will not have the numbers to -reinstate the building watchdog in a joint sitting of Parliament.
The Coalition requires 114 senators and members of the House of Representatives to guarantee "the "bill - "which "was blocked in the last Parliament and used as an election trigger - to support the Aus-tralian Building and Con-struction Commission legislation.
The ALP's own polling had predicted a national swing of up to 4 per cent, but not in the marginal seats it needed to form government or deliver a hung parliament.
A Galaxy Research exit poll of 25 marginals seats predicted the election was too close to call, with a swing to Labor delivering it 68 seats Last night the ALP claimed the bellwether seat of Eden-Monaro in NSW, which traditionally goes the way of the government.
Earlier, Labor powerbroker Graham Richardson was calling it for the Turnbull government before changing his mind.
"Bill's not going to be prime minister tonight. Labor cannot win. He can never get rid of the baggage of Gillard and Rudd," he said.
But former Labor leader Mark Latham predicted the election would go down to the wire, with Bill Shorten likely to fare far better than many experts had expected.
"He might have a job in the Lodge if these trends continue in Western Australia and South Australia," he said.
"It's not out of the question.
"This is a far more absorbing and interesting election result than 90 per cent of us so-called experts thought it would be." The Labor leader, buoyed by a tight Newspoll, had greeted early-morning voters amid predictions that Mr Turnbull was slightly ahead of Labor, 50.5 to 49.5.
"I am absolutely sure Labor is closing at the right time," Mr Shorten said. "We are ready to serve. I hope that I and Labor have done enough to earn the votes of the Australian people." PAGE 65: EDITORIALPAGE 72: CARTOON