Gillard government returned to power

Prime Minister Julia Gillard has formed the first minority federal government since World War II, but the key independents have warned Labor is on parole.

After 17 days of complex talks, independent MPs Tony Windsor and Rob Oakeshott on Tuesday agreed to back the return of the Gillard government, which in turn pledged $10 billion in spending on regional projects.

A third independent, Queensland's Bob Katter, decided to back the coalition based on its commitment to much of his 20-point plan.

But the final makeup of the new federal parliament will be Labor 76 - backed by a Greens MP and three independents - and the coalition 74, including a WA Nationals member and Mr Katter.

Ms Gillard offered to make Mr Oakeshott her new minister for regional development, but he has yet to consult his family and decide on the issue.

Mr Oakeshott said the deciding factors had been the "raw numbers" on the floor of parliament, the workability of the Senate, the possibility the coalition would aim for his seat at the next election and the greater chance of an early poll under an Abbott government.

But he also wanted to ensure he made a "20-year decision" that improved regional Australia and met what he called the "eyes of my children" test.

And he underlined how fragile the government could be if it did not deliver on its promises, which included extra spending on hospitals, schools, roads and housing, as well as subsidised broadband in the bush.

"This is not a mandate for any government," Mr Oakeshott said, putting the government on parole.

He said the next three years would be "ugly, but it's going to be beautiful in its ugliness".

Mr Windsor said cheaper broadband, a new look at climate change through a bipartisan committee and better spending on rural health and education had won him over.

"The admission (from the major parties) is they have neglected country Australia," the New England MP said.

The prime minister pledged to deliver stable, effective and secure government which would be held "more accountable than ever before".

"Let's turn back the curtains and let the sunshine in," Ms Gillard said, alluding to Mr Oakeshott's phrase that "sunshine is the best disinfectant".

She said the government would fund its promises through extra savings in the budget.

Ms Gillard said she believed the government had a mandate, but admitted Labor had been sent a message by voters.

"I've learned some lessons and the government has learned some lessons," she said.

Opposition Leader Tony Abbott said he was disappointed in the final result, especially as the coalition received more votes and won more seats than Labor at the August 21 poll, but congratulated Ms Gillard.

Mr Abbott promised to hold Labor "ferociously to account" as the next three years of "inevitable uncertainty" unfolded.

A key plank to their attack would be the National Broadband Network, which he described as "school halls on steroids and a minefield of waste and incompetence".

He said he would recontest the Liberal leadership at a party room meeting on Thursday, at which deputy Julie Bishop will also stand again.