MALCOLM Turnbull was hanging on in a cliffhanger contest last night that could see him form government by a thread.
The Prime Minister was clawing his way back with 74 seats in the 150-seat Parliament in a shock result that saw some of his key plotters dumped by voters.
The result raised the stunning prospect of another hung Parliament, but Liberals were confident that pre-poll votes would get them over the line to secure the 76-seat majority they need to form government. 
Just after midnight, Mr Turnbull told Liberal faithful at a Sydney hotel he was confident of forming majority government when results were known from Tuesday.
"The Labor Party have no capacity in this Parliament to form a stable majority government - that is a fact," he said.
Mr Turnbull accused Labor of running a well-funded campaign of lies by falsely claiming the Coalition would privatise Medicare.
Opposition Leader Bill Shorten said the election result might not be known for days but declared Labor was back.
"Three years after the Liberals came to power in a landslide, they have lost their mandate," he said.
"In the past three years we have united as a party." Mr Shorten said Mr Turnbull would never be able to claim Australians had adopted his ideological agenda.
"He will never again be able to promise the stability which he has completely failed to deliver tonight," he said.
Deputy Prime Minister Barnaby Joyce flatly rejected calls for Mr Turnbull to resign.
"I disagree with that. I don't think the Australian people want the revolving door of prime ministers. I've spoken to Malcolm a few times tonight," Mr Joyce said. Liberal strategists predicted the party had secured as many as 74 seats - two seats short of a majority, with the ALP 66 seats, Greens one and independents four. Five seats remained undecided. Official counting had the major parties deadlocked at 69 seats.
The Prime Minister needs 76 seats to govern. If he can form government in the days ahead, the Mr Turnbull faces a party-room revolt over superannuation with former Senate leader Eric Abetz warning MPs would overturn the retrospective changes to super nest eggs proposed by Treasurer Scott Morrison.
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 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.
Labor leader Bill Shorten declared he was "ready to serve" after blitzing polling booths, with gains in Western Sydney and Tasmania keeping the ALP's hopes alive.
"We always knew this election was going to be very tight," Treasurer Scott Morrison said.
The nail-biting result came as former Prime Minister Tony Abbott appeared to take a 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." The Government was still cautiously confident it would win enough seats in the Lower House to claim victory, but many 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 election-trigger"bill to support the controversial Aus-tralian Building and Con-struction Commission legislation.
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