Malcolm Turnbull is looking more confident than in recent days but whether the Coalition can form a majority government is still unclear. Picture: Mark Calleja

But the other six seats in doubt remain excruciatingly close, with the Coalition’s total now on 73 against Labor’s 66, by the ABC’s count.

The Australian Electoral Commission (AEC) has the Prime Minister even further ahead, with 74 seats at last count to Labor’s 71.

In the Queensland seat of Capricornia, Labor is leading by just 464 votes, with predictions suggesting it could flow to the Liberals with postal votes and then back again with absentees.

It’s even closer in the seat of Hindmarsh in South Australia, where the ALP is in front in by a mere 68 votes.

The Coalition now looks likely to hold the 76 seats needed to form majority government in the 150-seat lower house, as postal votes and recounts of existing votes have favoured Liberal and National candidates over Labor.

Mr Turnbull is still preparing for a hung parliament, however, in case he doesn’t reach 76.

He yesterday met with potential kingmaker Nick Xenophon in Sydney and today spoke to re-elected MP Bob Katter and other independents in Queensland, also taking the time to pose for selfies with Brisbane locals, a smile we haven’t seen in days plastered across his face.

The Prime Minister was looking upbeat again today as he met locals alongside member-elect for Brisbane Trevor Evans. Picture: Tertius PickardSource:Getty Images

Mr Katter this afternoon declared his support for the government after “amicable” talks with Mr Turnbull.

But the independent said he maintained his right to change his position at any time and his support depended on several political issues.

Asked if he thought Mr Turnbull was listening to him today, he laughed: “When you’re on 74 seats and you need 76, I thought he was listening very closely.”

His promise will make the Prime Minister feel even more comfortable in his position.

“I am very confident, very confident indeed that we will form ... a majority government in our own right, but I am, of course, talking to the crossbenchers as well,” Mr Turnbull told reporters, referring to the independent and minor party lawmakers who sit between the two main parties and could hold the balance of power in a divided parliament.

“But so far the counting trends are very positive from our point of view.”

Whether other independent MPs will support the Coalition is not yet certain. Senator Xenophon told the ABC that he, Katter and Jacqui Lambie, “share a concern about Australian jobs and Australian manufacturing and Australian farming land ... when it comes to our foreign investment.”

Opposition Leader Bill Shorten insists the fight isn’t over yet, telling reporters in Perth today that Labor would work with crossbenchers and independents to make Parliament work.

“If Mr Turnbull is dragged cross the line narrowly, his problems, and unfortunately Australia’s, are only just beginning.”

Mr Turnbull posed for selfies with Brisbane locals, looking happier than he has in days. Picture: Tertius PickardSource:Getty Images

He said if the Prime Minister was returned, it would be with a diminished authority and mandate, while Labor had gained not only numbers but “quality”.

The state of the nation is still far from stable, with Standard & Poor’s downgrading Australia’s triple-A long term credit rating outlook to negative this afternoon, thanks to growing fiscal vulnerabilities.

Mr Shorten said the S&P statement was a vote of no confidence in the PM.

Treasurer Scott Morrison, who has said he’s confident the Coalition won’t need crossbenchers to form a minority government, admitted today that “the report has been issued on the basis of the election, they have made that very clear.”

Nevertheless, Mr Morrison insisted the government’s focus on a strong economy was the correct response.

“It would not be the responsible thing to do in this environment to take policy decisions that increase the deficit,” he said, in a clear dig at Labor’s budget. “I have no intention of postponing the pace of fiscal consolidation.

“What the Australian people want to be reassured of is that there is a clear plan.”

Shadow Treasurer Chris Bowen saw it differently, saying the report was “a vote of no confidence in this Government’s ability to deal with the Budget situation.”

He also criticised Mr Turnbull’s decision to call a double dissolution election, saying it had increased the likelihood of political instability.

Remember the campaign? Mr Turnbull was either walking around like he had it in the bag, or hardly walking around at all, acting like he didn’t need to campaign in the election he was convinced he had already won.

As the agonisingly close results poured in at the weekend, we saw a chastened Turnbull, but we are now seeing the return of a truly confident leader.

From Saturday night onwards, members of the media assigned to watch for movement at the Turnbull residence were greeted by a gruff and unenthusiastic leader when he had to leave the house to manage his party’s post-election crisis. But yesterday he looked like he knew something we didn’t.

The PM is feeling confident, but still preparing for the possibility of a hung parliament. Picture: Tertius PickardSource:Getty Images

When the PM emerged from his Sydney mansion yesterday, he had a smile across his face and a level of energy that we hadn’t seen since before Saturday’s poll.

And now it looks like Mr Turnbull was right to be smug.

With 10 of the 15 million votes now counted, the Coalition is edging towards retaining government by a slim majority.

Yesterday’s counting delivered two more seats to the Liberal Party, with Victoria’s Dunkley and Chisholm looking to fall in the government’s favour.

Postal votes have seen seats like Nationals-held Flynn in rural Queensland and Liberal-held Cowan in Western Australia, which looked to be held by Labor on the night, surge towards the Coalition, although Labor pulled further ahead this afternoon in Flynn.

Of the seats still in doubt, the only one where the LNP leads is the Queensland electorate Forde, where sitting member Bert van Manen is in front of Labor’s Des Hardman by 687 votes and expected to win the day.

The ALP’s Cathy O’Toole is ahead of the LNP’s Ewen Jones in Herbert by 449 votes.

The Prime Minister today obtained the support of Bob Katter, pictured, who he may need to lean on in order to form government.Source:News Corp Australia

As well as looking ahead to what the potentially chaotic 45th Parliament of Australia may look like, the Coalition is also reflecting on where it went wrong in the campaign it was so sure of winning.

A post-election poll published by the Daily Telegraph today reveals almost 40 per cent of voters rated Medicare as the most important issue of the campaign, showing Labor’s “Medi-scare campaign” cut through.

Senior government ministers, including deputy Liberal leader Julie Bishop, have conceded the government made some mistakes, and could have gone harder.

“We didn’t attack Bill Shorten and the unions in a way that we could have. We didn’t expose their record on border protection as we could have. And that was because we wanted to run a positive, optimistic campaign,” she said earlier this week.

But she insisted she had faith in Mr Turnbull. “I think he did a very competent job. I do have faith in him. I think he’ll be a great prime minister should he get over the line as I hope we will,” she said.

Meanwhile, as Mr Shorten continues his victory lap of the nation in Perth following the surprise result for Labor, his own leadership could be under threat.

Labor MPs are due to gather in Canberra on Friday to make a decision on the position, despite the result of the election still being unknown.

A snap caucus meeting has been called in accordance with the rules put in place by former leader Kevin Rudd, which automatically throw open the party’s leadership if Labor loses an election.

But Mr Shorten is unlikely to lose his job. His predicted successor Anthony Albanese has said he won’t be challenging the leader.

Mr Shorten runs his victory lap in Launceston where Labor had a surprise victory.Source:News Corp Australia

SEATS HANGING IN THE BALANCE

Capricornia (Nationals QLD): Sitting LNP MP Michelle Landry is trailing by 464 votes in this Rockhampton-based seat. In 2013, postals flowed strongly to the LNP to give them a narrow victory. It could happen again.

Cowan (Liberal WA): Looked like a Labor gain on election night but its candidate Anne Aly might get run down by postal votes by the time the count is finalised on Friday week. Sitting MP Luke Simpkins picked up 62 per cent of them in 2013. He’s 722 votes behind at the moment.

Forde (LNP QLD): Sitting MP Bert van Manen now leads Labor’s Des Hardman by 687 votes in this Logan electorate south of Brisbane. More likely Liberal win as postals are counted.

Herbert (LNP QLD): Sitting MP Ewen Jones is trailing Labor’s Cathy O’Toole by 449 votes, but the race is far from over in the Townsville-based seat. Postals are flowing to Libs 62-38 per cent, which could get them home.

Hindmarsh (Liberal SA): Former Labor MP Steve Georganas leads by just 68 votes over sitting Liberal MP Matt Williams. Postals likely to put Libs just in front.

Flynn (Nationals QLD): Given to Labor on the night but the postals are flowing to sitting MP Ken O’Dowd. That could get him home in a very tight contest. Labor’s Zac Beers leads by 645 with 81.1 per cent of the vote counted.

— With AAP