Reuters International

Australian Prime Minister Malcolm Turnbull is followed by a televsion camerman as he walks to his car outside his home in Sydney, Australia, July 5, 2016. AAP/David Moir/via REUTERS

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By Matt Siegel

SYDNEY (Reuters) - Embattled Australian Prime Minister Malcolm Turnbull on Wednesday pulled within striking distance of the votes needed to form a narrow majority government in a cliffhanger election that has left the country in limbo and his leadership in doubt.

"The government is still on track to form a majority government," Treasurer Scott Morrison told Australian Broadcasting Corp (ABC) radio.

Electoral officials are counting 1.5 million postal and absentee votes that will be crucial to the result of Saturday's poll, which saw a swing against Turnbull's conservative coalition government and the rise of populist independents.

A final reckoning may not be known for days, possibly weeks, leaving Australia in a political vacuum.

The latest projections by the ABC shifted two seats into the government's column, giving Turnbull's Liberal-National coalition 71 out of 150 lower house seats, and the centre-left Labor opposition 67. Seven seats are too close to call.

Both major parties are short of the 76 seats needed to form a majority government in the House of Representatives, and negotiations are underway with independents who will hold at least four seats.

"It's still either a very, very narrow coalition majority or hung parliament," ABC polling expert Antony Green told ABC's Radio National.

Turnbull's gamble in calling an early election failed to deliver a clear mandate for his agenda of corporate tax cuts and his disastrous polling has led to attacks from inside and outside his coalition after his attempt to end a querulous upper house Senate failed.

Despite the internal criticism, Turnbull's position as Liberal leader does not appear in danger in the short term.

The surge in support for independents, combined with rules that make it easier for smaller parties to win Senate seats in a so-called double dissolution of parliament, will likely make it impossible for Turnbull to push through policies including a A$50 billion ($37.19 billion) corporate tax break over 10 years.

Even if the coalition wins a narrow majority in the lower house, Turnbull would then have to shepherd legislation through an even more intransigent Senate.

But Treasurer Morrison said the government would not abandon its economic policies. "We will go forward with our legislation plan for the budget, certainly if we return as a majority government," he said.

The election was meant to end political turmoil that delivered Australia four prime ministers over the past three years. Instead, it has left Turnbull's authority in tatters less than a year after he ousted then prime minister Tony Abbott in a party-room coup with a promise of stable government.

The National Party, the junior coalition partner, is demanding a greater say in a future government given its strong electoral performance.

The Nationals represent rural Australia and take a strong stance on foreign ownership and trade. In May, the party was influential in blocking a Chinese bid for cattle giant S. Kidman & Co by a group headed by Hunan Dakang Pasture Farming Co Ltd, saying the sale was not in the national interest.

While Liberal Party Senator Corey Bernardi, a social conservative and strong supporter of Abbott, signalled he was in talks to start a breakaway Conservative Party of Liberals disaffected with what they see as Turnbull's centrist policies.

"Irrespective of the final election result, the clear mission now is to bring people together for the good of the country," Bernardi wrote on his blog. "That is going to take the formalisation of a broad conservative movement to help change politics and to give common sense a united voice."

($1 = 1.3444 Australian dollars)

(Reporting by Matt Siegel; Editing by Stephen Coates and Michael Perry)

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