Julia Gillard holds onto Australian premiership

• Prime Minister Julia Gillard has outflanked opposition leader Tony Abbott Picture: AFP/Getty Images

Australia's first female prime minister promised that her government would be stable over the next three years, although the defection of a single lawmaker would bring down her administration.

"Labor is prepared to deliver stable, effective and secure government for the next three years," she said.

The independents' support means Ms Gillard can continue with her plans to introduce a 30 per cent tax on iron ore and coal miners' burgeoning profits, and make Australia's biggest polluters pay for carbon gas emissions.

Labor gained the ability to form a government for a second term after two independents - Tony Windsor and Rob Oakeshott - joined her coalition more than two weeks after elections failed to deliver a clear winner for the first time since 1940.

Yesterday's decision by Mr Windsor and Mr Oakeshott gives Ms Gillard's party control of 76 seats in the 150-seat House of Representatives and avoids the need for a fresh election.

Ms Gillard has rewarded the two rural-based politicians by promising AUS$10 billion (about 6 billion) in new investment on rural schools and hospitals.

She also announced she offered Mr Oakeshott a Cabinet post, which he had yet to accept. Mr Windsor had said he did not want such a job in the government. The prime minister also said she would keep her promise to make her predecessor, Kevin Rudd, a senior Cabinet minister.

Party power-brokers dumped Mr Rudd in favour of Ms Gillard in an internal mutiny in June in an attempt to improve Labor's standing in opinion polls.

Rudd loyalists were suspected to be behind a series of damaging leaks to the media against Ms Gillard during her election campaign. Labor lost 11 seats in the election, many of them in mr Rudd's home state of Queensland.

Bob Katter, an independent who sided with opposition leader Tony Abbott's conservative Liberal Party, said yesterday he would have supported Labor if Mr Rudd was still its leader.

Ms Gillard said voters sent her a message by almost making her government the first to lose power after a single term since 1931. "What they are asking us to do is not to become waylaid in partisan bickering but to build for the future," she said.

Mr Abbott's coalition won 73 seats and with Katter's support commands 74 seats. He said yesterday he was disappointed by the result, adding the government should be brought down if it proves incompetent.

Australia's election on 21 August was the first since 1940 to fail to deliver a clear winner. That parliament initially chose a conservative minority government, which was brought down when two independents switched allegiances to Labor.

Mr Windsor and Mr Oakeshott, who have both championed better communications infrastructure for rural areas, said Labor's plan to introduce a $43bn high-speed fibre-optic national broadband network was a major factor in their decision. The Liberal Party had promised a smaller, slower $6bn network.

"What this is, is a hard decision," Mr Oakeshott said. "There's no question about that … This could not get any closer."