Australian independent lawmaker Andrew Wilkie on Thursday said he will back the center-left Labor Party, a move that delivers some momentum to Prime Minister Julia Gillard's bid to form a minority government after an inconclusive national election in late August.

With Wilkie's support, Gillard's Labor now controls 74 seats in the 150-seat lower house of Parliament, where governments are formed, against 73 seats for the center-right coalition led by Tony Abbott. Either side needs 76 seats at a minimum to govern.

Treasurer Wayne Swan said in a speech that a minority government would pose a tough test, but "I have no doubt...we could have a successful and effective three year Labor government with the support of the cross benches."

Ultimately though, while betting odds firmed in Labor's favor after Wilkie pledged his support, the question of who will form government rests with three conservative-leaning independents who are still considering who to back.

The trio, Bob Katter, Robert Oakeshott and Tony Windsor, has been negotiating as a bloc, though Katter could break from the pack Friday when he is due to release his personal wish list to both major parties. Windsor meanwhile told Sky TV the three could yet make a decision separately on which party to support.

"Now it is time to actually sit down and make a decision and I'll be doing some more homework tomorrow and maybe going home for a while over the weekend and returning on Monday to make a decision hopefully," Windsor said.

Oakeshott told Sky TV he will look to make a decision early next week, while Katter said on the same program that he has yet to make up his mind.

The three independents are likely to determine the fate of one of the most divisive policies of recent times: A proposal by Labor to levy a new tax on mining company profits.

The tax proposal was vigorously opposed by industry and played a role in the sudden ouster of Kevin Rudd as the country's prime minister in June. The coalition is promising to scrap the tax if it takes power.

Oakeshott and Windsor broadly support the idea of a profit-based mining tax that replaces state-based royalties schemes, as does the one Greens lower-house lawmaker, Adam Bandt, who gave the Labor Party his formal backing Wednesday.

Katter opposes the tax, while Wilkie believes the current proposal is flawed and should be the subject of further industry consultation.

Andrew Forrest, chief executive of iron ore miner Fortescue Metals Group Ltd. (FMG.AU), jetted into Canberra Thursday to lobby the independents over the tax. Forrest is a vocal opponent of a deal Gillard reached with the country's major miners in July--just days after replacing Rudd in a party coup--which cut the planned headline rate of the tax to 30% from 40% and excluded all minerals except iron ore and coal.

He argues that deal favored the big three--BHP Billiton Ltd. (BHP), Rio Tinto Ltd. (RTP) and Xstrata PLC (XTA.LN)--at the expense of smaller miners who still need to attract large amounts of capital to fund their expansion.

"We thought we'd use the opportunity (Thursday) to explain our position on the mining tax" to independent lawmakers, a Fortescue spokesman said.

"There needs to be tax reform, but the process of how the mining resource rent tax came about, we don't agree with. It needs to be taken off the table in its present form," he added.

Labor won Wilkie's backing Thursday with a commitment to address one of his key issues: problem gambling.

In a move that could have implications for the earnings of wagering firms like Tatts Group Ltd. (TTS.AU) and Aristocrat Leisure Ltd. (ALL.AU), Gillard told reporters she'd agreed to seek a federal solution to gambling reforms that could see it assume responsibility from state governments for setting some wagering legislation.

Wilkie is only offering to back a Labor government on issues of confidence and supply--that is, the day-to-day business of government. He told reporters Thursday he will assess individual policies, such as the mining tax, on their merits.

The Tasmania state-based independent also qualified his support for Labor by saying should Abbott take power "he would not find me obstructionist."

In a blow to the coalition's bid for office, however, Abbott was Thursday forced to defend the cost of the coalition's election policies after Treasury modelling found a multi billion-dollar hole in its estimates.

Independent lawmakers indicated the blunder had shaken their confidence in the coalition to manage Australia's A$1.3 trillion economy, with Windsor calling on the coalition to explain the "black hole."

"I was surprised by the figure when I saw it," Oakeshott said on Sky. "Somewhere up to a A$10.5 billion miss is a big miss."

Joe Hockey, treasury spokesman for the coalition, stood by the coalition's own estimates, describing the Treasury shortfall as a "difference of opinion."

Both parties have promised to return Australia's budget to surplus by the year beginning July 1, 2012. But the Treasury figures undermine a key campaign pitch of the coalition--that budget surpluses would always be higher under a coalition government than under Labor.

Treasury estimates Australia could record an underlying budget surplus of A$2.61 billion in fiscal 2012-13 under a coalition government, compared with an upwardly revised A$3.84 billion under Labor.

-By Rachel Pannett, Geoffrey Rogow and Enda Curran Dow Jones Newswires; +61-2-6208-0901; rachel.pannett@dowjones.com; geoffrey.rogow@dowjones.com; enda.curran@dowjones.com;

 
 
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