Howard's conservative government defeated the Labor opposition of Kim Beazley with less than 50 per cent of the vote and is expected to rule with a sharply reduced majority of around eight seats, down from his pre-election 44-seat majority.

Chief economist Akis Haralabopoulos at GIO Australia, said local markets had the potential to rally when they open on Monday, relieved that a hung parliament has been avoided. Haralabopoulos said markets would also welcome news that the protectionist One Nation party will have virtually no say in government, after pre-election speculation One Nation could hold the balance of power in thesenate upper house of parliament.

Hanson, a former fish and chip shop owner, is almost certain to lose her seat and One Nation is likely to gain only one seat in the senate, despite fielding candidates in most electorate.

``In that sense it is a very good result, and a result that will likely mean we'll get much needed tax reforms,'' he said.

However, Haralabopoulos expected Howard's planned 10 per cent goods and services tax, the centrepiece of his re-election platform, would face a rough ride through parliament after the government failed to gain control of the senate. The small left-leaning Democrats party, which opposes the consumption tax because it includes food, is expected to gain control of the senate. But markets may quickly forget the Australian election as global economic forces reassert their dominance, analysts said.