Australian Julia Gillard's majority becomes slimmer

Australian prime minister Julia Gillard's wafer-thin ruling majority became even more fragile on Thursday after the conservative opposition backed out of a deal over the prized job of parliamentary speaker.

Gillard's Labour won a second term with the support of three independents and one Green lawmaker after dead-heat August 21 elections, giving the party control of 76 seats in the 150-seat lower house.

But Gillard must now sacrifice one lawmaker to be non-voting speaker after the opposition backed down on a deal to ensure the voting numbers remained balanced, prompting an angry response from key independent Tony Windsor.

"Their game plan now is to destroy this Parliament," he said of the opposition.

"It was always going to be fragile and it required a bit of goodwill on both sides."

It means Gillard will have only one vote to spare in the House of Representatives, further weakening her control of the first minority government since World War Two. "I view this to be an extraordinary set of events," Gillard told reporters.

Opinion polls show voters do not expect the government to last a full three-year term, with the slender majority also adding to uncertainty over plans for a 30% profits-based tax on miners and a policy to price carbon emissions.

While financial markets have been largely unmoved by the political upheaval, leading business lobby groups have called for the government to move quickly on major policies including a price on carbon to smooth investment plans.

The new Parliament meets on September 28, when Gillard will have the first opportunity to test government numbers in the lower house since the election.

Under a deal signed by the government, opposition and key independent lawmakers in early September, all sides of politics committed to keeping the numbers balanced by granting a "pair" to whoever becomes speaker.

The speaker does not vote in Parliament but casts a deciding vote in the event of a tie on controversial legislation. Granting the speaker a "pair" meant a member of the opposing party would also abstain from voting, ensuring the government would retain its normal majority.

Opposition leader Tony Abbott said he backed out of the deal because it did not comply with the constitution.

"The first act of every parliament is to choose a speaker, and it is the first responsibility of government, when parliament resumes, to provide a speaker," Abbott told reporters.

"If the government is unable or unwilling to provide a speaker for the Parliament, well the prime minister should not have accepted the governor-general's commission."

Political analyst Nick Economou said despite the close numbers in Parliament, Gillard could still lead a stable government which would be urged to push through reforms by the Greens and independent lawmakers.

"There are a whole bunch of people with a vested interest in making it work," Economou, from Melbourne's Monash University, said, adding the independent lawmakers would want to avoid an early election.

"There will be a lot of pressure on the government to respond to reform agenda pushed by the Greens and independents. So I don't expect the government to be too timid or cautious."